The announcement of China's export controls on gallium and germanium has caused an uproar worldwide. Western countries, led by the United States, immediately expressed their dissatisfaction with this announcement. However, this has not stopped these countries from submitting applications for export licenses to China. With the current industrial strength of the United States, it could build its own production line to be self-sufficient. Moreover, the United States ranks first in the world in germanium ore reserves. But the reality is harsh; the United States simply does not have the capability to build its own production line. Why has China imposed export controls only on gallium and germanium? What factors have influenced the establishment of gallium and germanium production lines?

Why does China restrict gallium and germanium specifically?

"Strike the snake at its seven-inch point," the announcement of China's export restrictions on gallium and germanium can be said to have struck at the "seven-inch point" of Western developed countries, led by the United States.

On the surface, China's restriction on the export of gallium and germanium this time is due to the increased restrictions on the export of semiconductor equipment by the Netherlands.

However, if we delve deeper, countries like the United States and Japan have included gallium and germanium in their strategic critical minerals list. China's actions are merely a reasonable and justified export control on strategic materials.

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"There is oil in the Middle East, and China has rare earths," this phrase has always been used to mock the abundance of China's rare earth mineral resources. However, China's rare earths have been restricted in export since 2007. Why have gallium and germanium only now been subjected to export restrictions?

In fact, most people here have fallen into a misunderstanding. Gallium and germanium do not belong to rare earth resources. The "rare" in these two metals actually refers to their scarce production.

How small is the production of these two metals? China's currently identified reserves of gallium are approximately 190,000 tons, and in 2022, China's production of gallium was only 606 tons.The global reserves of germanium are currently estimated to be around 8,600 tons.

China's annual production of gallium accounts for 90% of the global output, which means that countries around the world that have a demand for gallium are relying on China.

Germanium is quite unique; the country with the most reserves is the United States, with China's reserves being only about 4% less than those of the U.S.

Neither of these metals occur as standalone ores; they are always found in association with other minerals.

These two metals are also essential raw materials for radars, optical components, infrared devices, solar cells, and 5G equipment. The "construction projects" involving gallium and germanium are widespread in high-tech, aerospace, and defense industries.

The importance of gallium and germanium is not determined by their production volume, and moreover, both reserves and production are quite scarce. It is reasonable and justified for China to restrict exports.

Some may wonder, given that the United States is the most technologically advanced country, why can't it establish its own production line to be self-sufficient, and even export surplus capacity for profit to alleviate domestic competitive pressures?

This is where China's wisdom lies; the true value of gallium and germanium is not in "obtaining" them, but in "how to obtain" them.

The United States does not wish to have its own gallium-germanium production line, but its own conditions simply do not meet the requirements for such a production line.

A complete supply chain is essential.China's monopoly on gallium and germanium is not only reflected in production and reserves but more so in the monopoly over the production methods of these elements.

Gallium and germanium play a crucial "role" in practical applications, but they can only be obtained from the "waste" of producing alumina.

The current trading prices of gallium and germanium in the international market are not high, primarily because only China can produce them.

The prices are set by China itself, possibly with the initial consideration that the whole world needs them, and China also needs to develop its own country, so setting a reasonable price to avoid "heaven's wrath and people's complaints" is sufficient.

If there were a separate production line abroad, the prices of gallium and germanium might be far higher than they are now.

Producing gallium and germanium is not a simple metal smelting process; their production involves an entire supply chain.

The reason why it is unlikely for the United States to produce gallium and germanium independently is that this entire supply chain requires too many aspects to cooperate, and the costs are too high.

To produce these two metals, the first thing to ensure is a complete alumina production line, followed by using alumina to produce electrolytic aluminum, and then using the "by-products" from this process to produce gallium and germanium.

Currently, there is a global surplus of alumina, and if the United States were to build a separate alumina production line solely for the production of gallium and germanium, the produced alumina would have no market, and the costs would be too high.

The production of electrolytic aluminum also requires a large amount of electrical energy, and the Middle East, as the world's largest energy exporter, has been trying to break away from the dollar hegemony, which is also an obstacle for the United States.The raw materials required in the production process, such as alumina and aluminum, need to be transported to other markets for sale. China's railway coverage can fully handle this task, but there is skepticism about whether the United States' logistics and transportation capabilities can meet the standards.

The above pertains to the practical aspects of operations. If the United States were to establish an independent production line for gallium and germanium, it might encounter difficulties. However, if the United States is willing to disregard costs, it could potentially achieve this.

China's advantage in the production of gallium and germanium is not only reflected in its large market size and abundant resources required throughout the entire metal production chain but is also primarily due to the technological capabilities in the metallurgical industry that China possesses.

It cannot be denied that if the United States is willing to ignore costs, it has the capability to build a production line and dump the by-products into some developing countries to offset cost losses.

However, whether the metallurgical technology can meet the requirements is uncertain.

The metallurgical industry causes significant environmental pollution, and the production of gallium and germanium requires a mature metallurgical industry. If the United States大力发展 its metallurgical industry domestically, it would inevitably face opposition from the American public, and the high cost of labor and technology is also an obstacle that cannot be ignored.

Given the United States' hegemonic status, it could establish production lines in other developing countries. However, the concept of a global community with a shared future for mankind would strongly oppose such actions by the United States.

For the current United States, the greatest risk is not technology and production conditions but whether it is worth producing alone.

When the United States overcomes difficulties in investment, technology, and markets to produce these two metallic elements, China, as the current largest producer, only needs to reintroduce its inventory into the market. The prices of gallium and germanium would naturally be greatly impacted and decline, which is entirely inconsistent with the United States' value system that prioritizes its own interests.

The inability of the United States to independently build a production line for gallium and germanium was determined from the very beginning of the establishment of the Bretton Woods system.The financial system of the United States determines everything.

After the pandemic, the direction of economic development in countries around the world has diverged significantly, with some industries thriving and others caught in a dilemma. The United States is one of the most evident nations in this regard.

Post-pandemic, the financial sector in the U.S. has flourished, yet some major technology companies have initiated a wave of layoffs.

This is the fundamental reason why the U.S. is unable to establish gallium-germanium production lines.

Since World War II, the Bretton Woods system, which pegged the U.S. dollar to gold, has allowed the United States to reap the benefits of a highly profitable venture with minimal effort.

As the "world's hegemon" and the "global center," manufacturing factories within the U.S. have tended towards full automation, eliminating the high cost of labor. Alternatively, the U.S. invites foreign companies to invest and establish factories within its borders, attracting foreign capital and addressing domestic employment issues.

If factories have specific environmental or resource requirements, the U.S. invests in factories in some developing countries. The U.S. dollar, as the currency of global trade, significantly reduces the costs of investing in and establishing factories abroad, and the cheap labor in developing countries are irresistible temptations for the U.S.

After decades of such development, it has become nearly impossible to find many decent manufacturing factories within the U.S., as exemplified by the bankruptcy of Detroit, once known as the "Motor City."

Investing in financial companies has become the mainstream enterprise in the U.S., with these financial investment firms using their cash to invest worldwide, reaping benefits without any effort.

For the U.S., the entire world serves as its "manufacturing factory." Whatever is needed can be purchased with money. If money runs out, the U.S. issues Treasury bonds, as global trade relies on the U.S. dollar. The booming financial industry masks the potential drawbacks of the decline in manufacturing and also ties the U.S. to some Western developed countries.The United States has advocated for economic integration for many years, which has now become increasingly solid. American financial investment companies have become deeply entrenched in the entire Western economic system, and even the entire global economic system.

The subprime crisis led to the bankruptcy of Lehman Brothers, ultimately triggering a global financial tsunami. It was this event that made the world realize that if the American economy has a problem, the global economy will suffer as well.

Back to the topic, why can't the United States produce gallium and germanium on its own?

In the minds of developed countries in the West, the concept of an economic community has become "deeply rooted". If a gallium-germanium production line is to be built, it will inevitably involve multiple parties, cost sharing, and after the production line is built, the benefits will be distributed proportionally. It is also necessary to ensure that the countries participating in the construction have relatively equal rights. This process itself is very lengthy.

It is better to import directly than to build together.

China is one of the few countries in the world that has a complete set of basic production chains within its own country, which can fully meet its own needs. There is also a demand market for the by-products produced during the production process, and a complete industrial chain forms a perfect closed loop.

The annual production of gallium and germanium is only a few hundred tons, and there is no need for the United States to invest a huge amount of money to establish a production line on its own. Moreover, under the pressure of the debt crisis, the United States does not have the economic strength to build a production line independently.

A photolithography machine involves the interests of several countries. Once China's self-developed chips are mass-produced, it is a blow to their interests.

Western countries restrict the development of China's self-developed chip industry because they know China can do it; China restricts the export of gallium and germanium because China knows they can't do it.