Right now, the US and its allies are at “war” with China. Not the military kind…but a tech war. It’s a fight between East and West for AI, green energy, electric vehicles (EVs) and all-round technological supremacy.
In the past, there have been tit-for-tat punches via tariffs on the imports/exports of goods and services. However, things have escalated since then with the Biden Administration’s latest jab involving more restrictions on the sale of advanced US technology to China. In response, China imposed an immediate ban on the exports of critical minerals to the US.
So, which minerals? And what does this ban mean for the US?
Technology vs Commodities…
The US’s restrictions relate to high-bandwidth memory chips. The goal is to strangle China’s advancements in semiconductors and AI systems.
On the other hand, China’s response didn’t involve technology equipment. Rather, China astutely banned critical minerals needed for certain technologies. After all, without critical commodities, technology is non-existent.
China’s ban involves gallium, germanium and antimony.
Gallium is turned into Gallium Nitrate (GaN) – which is then used to replace silicon in semiconductors.
GaN chips are faster, more efficient, more environmentally friendly and can significantly improve performance across a wide range of applications, while reducing the energy and the physical space needed to deliver that performance when compared with conventional silicon technologies.
In fact, they can run up to 20x faster than old, slow silicon chips, and enable up to 3x more power or 3x faster charging in half the size & weight.
It’s not just the operational performance and system level efficiency improvements that make GaN chips attractive. They can save 80% in manufacturing and process chemicals, plus more than 50% savings in packaging.
Germanium is also used in semiconductors, but it’s also critical for infrared technology, fibre optic cables, and solar cells. While antimony is widely used in bullets and other weaponry.
In short, China is aiming to strangle Western tech efforts via their strong suit: rare earths…just as the US and its allies have done via limiting semiconductor technologies.
The BIG problem this ban creates for the West…?
China dominates the production of these minerals!
In 2023, China accounted for…
• 48% of the world’s mined antimony
• 59.2% of global refined germanium production
• 98.8% of refined gallium output.
More specifically, more than 50% of germanium imports and around 20% of gallium imports to the US comes from China.
A US Geological Survey report warned that a total export ban on gallium and germanium could result in a $3.4 billion hit to the US economy.
Imports from Europe won’t be enough to fulfil the US’s needs either.
This has led to calls from US officials to build domestic supply – which would ultimately reduce reliance on China.
Sure, there are currently mines under development in the US. But one can’t just dig a hole in the ground and start mining.
It takes a lot of money and TIME to get mines up and running.
So, with these supply pressures, I expect prices of gallium, germanium and antimony to soar.
Additionally, it wouldn’t surprise me to see further escalations during Trump’s presidency, which could involve other critical minerals such as rare earths.
Either way, 2025 is shaping up to become a BIG year for commodities. If you want to stay on top of commodities as well as mega trends in nuclear, AI and Crypto in 2025, then you need to be subscribed to South African Investor! See our exclusive discounted 50% subscription offer here.
Not a subscriber to Money Morning?
You can get free daily recommendations like these with Money Morning eletter. Just sign up here.
