China Implements Stricter Regulations on Exporting AI Chip-Making Materials

The Chinese Government’s Plan for Export Controls on Metals for Semiconductor Manufacturing

The Chinese government has recently unveiled its plans to implement export controls on metals that are primarily used in the production of semiconductors utilized in the development of artificial intelligence (AI) systems.

On July 3, the Chinese Ministry of Commerce, in conjunction with the General Administration of Customs, issued a joint statement stating that these controls are aimed at safeguarding national security interests. As per the new regulations, the export of certain gallium and germanium products will necessitate a government-issued license.

Effective Date and Covered Products

The implementation of these controls will commence on August 1 and will encompass eight gallium-related products:

• Gallium antimonide
• Gallium arsenide
• Gallium metal
• Gallium nitride
• Gallium oxide
• Gallium phosphide
• Gallium selenide
• Indium gallium arsenide

The controls will also apply to six germanium products:

• Germanium dioxide
• Germanium epitaxial growth substrate
• Germanium ingot
• Germanium metal
• Germanium tetrachloride
• Zinc germanium phosphide

Utilization and Significance of Gallium and Germanium

Gallium, a metal commonly found in electronics, is primarily used in the manufacturing of semiconductors, transistors, and lasers. It also has applications in LED production. Germanium, on the other hand, plays a crucial role in the manufacturing process of semiconductors, as well as in solid-state electronics and fiber optic systems.

The joint statement emphasized that individuals who export these regulated products without proper authorization or in excess of the permitted quantities will face penalties.

Global Supply Concentration and Sanctions

According to a 2023 report from the European Commission and the European Association of Critical Raw Materials Alliance (CRMA), China continues to hold a highly concentrated share of the global supply of germanium. The report also revealed that over 80% of the world’s gallium is sourced from China.

In October 2022, the United States imposed sanctions that restricted Chinese developers’ access to the most advanced semiconductors available on the market, including Nvidia’s A100 chips and the latest iteration, the H100. Currently, Nvidia’s A800 and H800 chips are accessible in the Chinese market, albeit with limited support for small-scale AI models. Chinese companies are reportedly seeking alternatives to overcome the limitations posed by the lack of access to higher-performance chips.

Potential Additional Export Restrictions

Authorities in the United States are currently deliberating the possibility of imposing additional restrictions on the export of high-level AI chips that are essential for the production of powerful AI systems.

In light of the AI boom, Nvidia, a prominent semiconductor developer in high demand, has witnessed a significant surge in the value of its chips. Cointelegraph approached Nvidia for comment regarding the recent developments in China, but the company”declined to comment.”