US firm AXT applying for permits after China restricts chipmaking exports

AXT

04/07/2023 04:01

SHANGHAI, July 4 (Reuters) - U.S. semiconductor wafer
maker AXT Inc  AXTI.O  said on Monday it would seek permits to
keep exporting gallium and germanium substrate products from
China, after Beijing abruptly imposed export controls on the
metals key to chipmaking. 
    California-headquartered AXT, which has manufacturing
facilities in China, said its Chinese subsidiary Tongmei would
immediately proceed to apply for the permits. 
    "We are actively pursuing the necessary permits and are
working to minimize any potential disruption to our customers,"
said AXT Chief Executive Officer Morris Young. 
    China's commerce ministry said on Monday it would control
exports of eight gallium products and six  germanium products
from Aug. 1 to protect its national security and interests. 
    The controls mark the latest salvo in an escalating war over
access to high-tech microchips between Beijing and the United
States and come as Washington mulls new restrictions on the
shipment of high-tech microchips to China.     
    In the first quarter, gallium arsenide and germanium
substrates exported from China contributed about $4.3 million in
revenue for primarily for consumer, automotive, display and
industrial applications, AXT said. 
    Gallium is used in gallium nitride and gallium arsenide
compound semiconductors for products ranging from power
electronics to 5G base stations. Germanium is also used in
infrared technology, fibre optic cables and solar cells. 
    Jefferies analysts said in a note China controlled 80% of
global output of the materials and that they saw this as China's
second and much bigger countermeasure in the U.S.-China tech
war, after Beijing banned some domestic sectors from purchasing
products from U.S. memory chipmaker Micron  MU.O  in May. 
    The controls are also likely a response to a potential U.S.
tightening of an AI chip ban, the analysts said. 
    "The risk of a rapid escalation of U.S.-China tension is not
small," they said. 
    "If this action doesn't change the U.S.-China dynamics, more
rare earth export controls should be expected."
    The United States and the Netherlands are set to deliver a
one-two punch to China's chipmakers this summer by further
restricting sales of chipmaking equipment, part of efforts to
prevent their technology from being used by China's military. 
    In 2022, top importers of China's gallium products were
Japan, Germany and the Netherlands, news website Caixin said,
citing customs data. Top importers of germanium products are
Japan, France, Germany and the United States. 

 (Reporting by Brenda Goh; Editing by Tom Hogue)
 ((brenda.goh@thomsonreuters.com; +86 (0) 21 2083 0088; Reuters
Messaging: brenda.goh.thomsonreuters.com@reuters.net))