01

There has been a big event recently, mainly targeting chips.

The United States has caused obstacles for our semiconductor industry, with 136 companies listed on the entity list. It feels like the US Department of Commerce is also a lackluster team, with two of these companies being deregistered. Even if we use Tianyancha or Qichacha to search, it is impossible to make this mistake. We may have to change bosses and lose interest in our work.

We definitely have to fight back, so we banned the export of small metals such as gallium, germanium, and antimony, and also imposed the same restrictions on graphite and superhard materials. There are two significant changes here. A year ago, it was called export control, which could still be purchased, but now it is prohibited from export and has implemented long arm jurisdiction. Even secondary traders who want to buy from China and resell to the United States are not allowed.

This measure is very tough, and many people haven’t understood it. Today, let’s talk about where the strength lies?

Let’s talk first, have the regulations of the past year been effective?

The research conducted by American think tanks has had a significant impact.

Gallium germanium antimony, these are essential materials for semiconductors and military industries. Due to the lack of these materials, the production capacity of many semiconductor companies has decreased by 20-30%, and the research and development progress of some high-end chips has been delayed by six months. In some military enterprises, the progress of certain missile and ship manufacturing has been slowed down by 4-6 months.

The most tragic thing is that some research institutions, such as quantum computing and communication industries, have basically stopped some experiments.

This situation was not anticipated by the United States, so what are they doing starting from the second half of the year?

Mainly hoarding and buying crazily.

So these small metals, some of which have increased in price by 50%, while others have doubled in price, there is no need to worry about selling them. As a result, the stock prices of listed companies that produce these metals have skyrocketed, such as Yunnan Germanium Industry, which had a low of 7.5 yuan at the beginning of the year and a high of 29.6 yuan last month.

02

How much does the United States currently have in reserve?

For example, germanium. They currently have 68000 germanium chips, over 14047 kilograms of pure germanium metal, and 6905 kilograms of germanium waste. According to the usage of the United States, this reserve can last for about two years. The United States is also very concerned about this matter. The Department of Defense has already recovered germanium materials from discarded night vision lenses and Bradley tank turret windows.

Even worse is gallium, as the US Department of Defense has stated, there are no reserves.

What should we do if we use it up? We have to find a way.

If you can’t buy it from China, you can only buy it from other countries. Which countries can replace China? After sorting out this matter, it becomes very clear. The key is to look at three points: reserves, technology, and cost.

Let’s talk about gallium first. China’s production capacity accounts for 68%, which is a byproduct of aluminum production. However, there are not many countries in the world that produce aluminum because electricity consumption is not environmentally friendly.

When it comes to reserves, there are only a few countries, such as Guinea, Indonesia, Vietnam, and Australia.

But in this regard, Guinea mainly provides bauxite upstream without its own processing technology, and has a very good relationship with China. The vast majority of bauxite is sold to China, making it difficult for the United States to intervene.

Indonesia and Vietnam have mines, but their technology is still in its infancy and far from meeting the requirements of the United States.

Australia has its own mines and good technology, but the disadvantage is high cost. Therefore, theoretically, if Australia expands its production capacity, it may be a solution for the United States.

Let’s talk about germanium again. In terms of reserves, the United States ranks first and China ranks second, but China’s production accounts for 70%. In the past, there were also factories in the United States that produced germanium, such as the Apex mine in Utah, but they were closed many years ago because the cost was higher than in China and they couldn’t be sold at all.

03

Someone said that the United States has the largest reserves of germanium, wouldn’t it be enough to just set up factories for processing?

This is not that simple. To produce germanium, you need to have another metal – zinc’s entire industry chain, and then purify germanium on the zinc metal industry chain.

The zinc industry chain has two major pain points for the United States:

1. 95% of patents are Chinese and cannot be bypassed;
2. Even here, with strong government support, the investment cycle can last up to ten years, requiring high support for electricity, environmental protection, and transportation. Therefore, in the United States, it is impossible to achieve this within ten years.

What about importing from other countries?

There are also Russia and Australia with large germanium reserves, and you see, there is also Australia.

Let’s talk about antimony again. In terms of reserves, China ranks first, Russia ranks second, and there are also Kyrgyzstan, Bolivia, and Australia.

The purification technology in Kyrgyzstan and Bolivia is far behind the demand in the United States.

So when you look at the three metals, Russia has them all but cannot sell them to the United States. Other countries can provide some production, but for the United States, they are just a drop in the bucket and not very useful.

Who is the most crucial country?

Everyone can tell it’s Australia.

According to your stereotype, would Australia blindly support the United States in this chip war with China?

04

Not necessarily. This matter is high here.

From 2020 to 2022, China Australia relations reached a freezing point, mainly due to Australia’s willingness to be a little brother of the United States and constantly provoking China in various matters.

Of course, we didn’t get used to him either,

From red wine, lobster, beef to barley and wood, all agricultural and sideline products in Australia have been restricted from import. For example, Australian red wine, which has been good for many years and invested countless amounts, has finally achieved a scale of billions in China. However, this restriction has caused a collapse in sales.

So can Australian farmers and businesses be satisfied? This determines the votes.

But miraculously, starting from 2023, we have gradually lifted restrictions on these products from Australia. Last year, Australia’s exports to China reached a record high of one trillion yuan.

A few days ago, we also lifted the import restrictions on beef from Australia, which means there are basically no restrictions anymore.

Behind this is a significant change in the relationship between the two countries. Two years ago, Australia was definitely responsive to the United States’ demands, but now, he has to weigh whether it is necessary. When the interests are big enough, consciousness will also be divided. Politicians may still be pro American, but for the sake of votes, he cannot go too far.

So when the United States runs out of these reserves, it will be difficult for it to find qualified alternatives from the existing system. So what should we do then? Do we still need to talk to China?