Volkswagen (VW) stated that it is closely monitoring the situation in metals

Volkswagen (VW) stated that it is closely monitoring the situation in metals markets following China’s imposition of export restrictions on two minor metals used in semiconductors and electric vehicles. However, some chipmakers downplayed the potential impact on supplies.

There are concerns that China may implement further restrictions on strategic exports, including rare earths, as a Chinese trade adviser suggested that the limits on gallium and germanium, effective from August 1, were just the beginning.

The sudden announcement, shortly before U.S. Treasury Secretary Janet Yellen’s visit to Beijing, led some companies to scramble for supplies of the two metals and raised worries about price increases. It has also prompted companies to reassess their reliance on the Chinese market.

VW, which relies on gallium and germanium for its automotive products, stated that it is prepared to take necessary measures along with its partners without providing further details. The two metals will also play a role in future autonomous driving functions for the German automaker.

The export restrictions could further strain U.S.-China relations as both countries compete for dominance in semiconductor and defense technologies. The outcome of ongoing talks between the two sides may influence the extent of future restrictions or sanctions.

While some industry players believe that China’s export controls may result in a domestic surplus of gallium and germanium, potentially impacting prices within China, overseas costs have already increased this week.

Germanium is used in high-speed computer chips, plastics, military applications, and satellite imagery sensors. Gallium is utilized in radar and radio communication devices, satellites, and LEDs.

Certain major chip manufacturers perceive China’s export controls on gallium as a warning about the economic consequences the country can impose. If prices rise due to restrictions, companies may have additional motivation to shift their supply chains.

Taiwan’s WIN Semiconductors, a user of gallium for optoelectronic devices, stated that it only purchases a small number of substrates from China, with the majority of supplies coming from Germany and Japan. Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, mentioned that it does not anticipate any direct impact on its production due to these measures.

NXP Semiconductors, a chipmaker that utilizes gallium or germanium in some chips for the automotive and communications sectors, stated that it does not foresee a significant impact on its business.

Note: The dateline for this story has been changed to Taipei from Taiwan.

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