DailySandChina's use of export controls on semiconductor-related materials is not new, but the pace and precision of that tool has accelerated sharply since 2022. What began as a largely reactive response to U.S. chip equipment restrictions has evolved into a calibrated, multi-front supply chain pressure campaign targeting the specific materials and technologies where China holds concentrated market power.
Understanding each round of controls — what it covers, what it doesn't, and what the market impact has been — is essential context for anyone tracking AI hardware supply chains.
The U.S. Actions That Triggered the Response
To understand China's export controls, it is necessary to start with the U.S. actions that preceded them.
October 2022: The Biden administration's Bureau of Industry and Security (BIS) issued sweeping export control rules restricting the sale of advanced semiconductor chips, chip-making equipment, and related software to China. The rules targeted chips at or above certain performance thresholds (effectively restricting Nvidia's A100 and H100 chips) and required export licenses — almost certainly to be denied — for semiconductor manufacturing equipment to Chinese fabs attempting to produce chips at 16nm and below.
October 2023: BIS updated and tightened the controls, closing loopholes that had allowed modified chip variants (Nvidia's A800 and H800) to be sold to China without licenses. New performance thresholds made it harder to design around the rules by degrading chip specifications.
January 2025: The Biden administration issued the "AI Diffusion Rule," establishing a tiered global framework for AI chip exports — a sweeping measure covering not just China but dozens of third countries used as transshipment routes.
These U.S. actions are the precipitating cause of China's escalating response.
Round 1 — Gallium and Germanium (August 2023)
What was announced: On August 1, 2023, China's Ministry of Commerce (MOFCOM) announced export controls on gallium and germanium and their compounds. Exporters were required to apply for export licenses from MOFCOM, which could be approved, delayed, or denied on a case-by-case basis.
What it covered: Eight gallium-related items (including gallium metal, gallium nitride, gallium arsenide, and gallium oxide) and six germanium-related items (including germanium metal, germanium dioxide, and several germanium compounds used in fiber optics and infrared optics).
What it excluded: The controls did not cover all end-use applications or all grades of the materials. Some downstream processed forms were initially outside the scope, though subsequent clarifications have narrowed these gaps.
Market impact: Gallium spot prices rose approximately 30% in the 60 days following the announcement. European and Japanese buyers accelerated stockpiling. In the first six months following the controls, China's gallium export volume fell by approximately 40% year-over-year, though some of this reflected the license processing backlog rather than outright denial.
Strategic rationale: Gallium and germanium were chosen precisely because they are materials where China holds dominant global market share (80% and 60% respectively) and where no short-term substitution is possible. The controls were calibrated to impose costs without triggering an immediate crisis — a signal of capability rather than a demonstration of maximum pressure.
Round 2 — Rare Earth Processing Technology (December 2023)
What was announced: China restricted exports of technology for extracting and separating rare earth elements, including process equipment and technical know-how. This was a precursor control — targeting not the materials themselves but the industrial knowledge required to process them.
Why it matters: Several countries (Australia, Canada, Brazil, the United States) have meaningful rare earth mineral reserves but lack refining and separation capacity. The December 2023 controls made it significantly harder for those countries to build independent processing industries, since the most efficient separation technologies — developed by Chinese state-owned enterprises over decades — are now explicitly restricted.
This is a more durable control than direct export quotas. It constrains the global supply chain at a structural level, not just at a flow level.
Market impact: Less immediate price impact than the August 2023 metals controls, but strategically more significant. Several planned rare earth processing facilities in the United States and Australia have cited difficulty obtaining equipment and process licenses as a challenge to their timelines.
Round 3 — Antimony and Superhard Materials (September 2024)
What was announced: China announced export controls on antimony, superhard materials (synthetic diamond and cubic boron nitride), and ultraviolet gallium nitride substrates.
Antimony's significance for AI: Antimony is used in flame retardants for printed circuit boards — every server motherboard in an AI data center contains antimony compounds in its substrate materials. It is also used in certain semiconductor dopant applications. China produces approximately 48% of global antimony supply, and the top-ranked producing countries outside China (Russia, Tajikistan) are not reliable trade partners for Western manufacturers.
Superhard materials significance: Synthetic diamond and cubic boron nitride are used as cutting and polishing tools in semiconductor wafer processing equipment. ASML and other lithography equipment manufacturers use these materials in precision mechanical components.
Market impact: Antimony prices rose approximately 200% between January and September 2024, reaching multi-decade highs. Several PCB manufacturers in Taiwan and South Korea disclosed supply concerns in quarterly earnings reports.
Round 4 — Dual-Use Technology and Advanced Chip Controls (Early 2025)
China has increasingly used its own export control framework (China's Export Control Law, enacted in 2020) to restrict dual-use technologies with semiconductor applications. In early 2025, additional restrictions were announced on graphite (used in lithium-ion battery anodes and as a moderator material in nuclear reactors), as well as tightening of the gallium and germanium controls to close export license loopholes.
Simultaneously, China imposed tariffs on U.S. semiconductor equipment imports — a reciprocal measure in response to expanded U.S. equipment export controls.
The Pattern and What Comes Next
Each round of Chinese export controls follows a similar logic:
- Target materials with dominant Chinese market share — specifically those where no short-term substitute exists and where Western alternatives require 5–10 years to develop
- Use license mechanisms rather than blanket bans — creating uncertainty and compliance costs rather than immediate supply cutoffs, which would trigger crisis-level responses
- Escalate in response to U.S. actions — each round has followed, with a lag, a significant new U.S. semiconductor export control action
The materials most at risk in future rounds include:
- Indium — used in indium tin oxide (ITO) for display screens and certain solar cells; China produces approximately 58% of global supply
- Tungsten — essential for ion implantation targets in chip manufacturing; China produces approximately 82% of global supply
- Graphite — already under partial controls; used in battery anodes and certain semiconductor processing steps
- Magnesium — used in aluminum alloys for server chassis and in certain die-casting applications; China produces approximately 85% of global supply
What the Chip Industry Is Doing
The strategic response from semiconductor manufacturers and their customers has three components:
Diversification: TSMC, Samsung, and Intel have accelerated qualification of alternative material suppliers in Japan, South Korea, Canada, and Australia. This is a slow process — qualifying a new material supplier for an advanced node process can take 18–24 months of testing.
Stockpiling: Major chip manufacturers now maintain 6–12 month strategic reserves of gallium compounds, germanium dioxide, and antimony-containing materials. This buffers against license processing delays but does not address a sustained supply cut.
Substitution research: The U.S. Department of Energy and DARPA have funded research into alternative materials for specific applications — including gallium-free GaN substrates and germanium-free transistor architectures — but these research programs operate on 5–10 year timelines before commercial deployment.
The Market Signal to Monitor
The most reliable real-time indicator of export control tightening is the monthly gallium export volume data published by China's General Administration of Customs, available approximately 45 days after the reference month. A sustained decline in approved export volumes below 40 tonnes per month (roughly the baseline consumption level of Western chip manufacturers) would signal a meaningful supply tightening.
For investors, the materials most sensitive to future control escalation — indium, tungsten, magnesium — are tracked through commodity price indices published by Metal Bulletin and Asian Metal.