World's biggest gallium buyer says clients stockpiling

Sumitomo Electric Industries

11/07/2023 11:58

By Ludwig Burger
       FRANKFURT, July 11 (Reuters) - China's planned export
controls on gallium have caused frantic stockpiling of
speciality semiconductor wafers made from the metal, according
to the world's largest gallium buyer.
    Freiberger Compound Materials relies almost entirely on
Chinese suppliers for its gallium needs to make wafers that go
into mobile phone radio signal amplifiers and optical
electronics.
    Consuming an estimated 10% of global gallium output, the
company has found itself at the centre of turmoil following
China's surprise announcement to control exports of gallium and
germanium products from Aug. 1.     
    "My clients are not relaxed about this at all. There's now a
burst of orders being placed to increase inventory levels. The
industry is very much on edge," chief executive Michael Harz
told Reuters.
    Chinese gallium companies have driven most rivals elsewhere
out of the market by undercutting them on price over the last
decade.
    Freiberger, with annual sales of 70-80 million euros
($77-$88 million) and a 65% market share in gallium arsenide
wafers for smartphone power amplifiers, competes with Japan's
Sumitomo Electric  5802.T  and a number of smaller Chinese
manufacturers.
    Red LEDs and red light sensors are another major use for
gallium arsenide.
    The group, which traces its roots to a state-owned
electronics factory in the former East Germany, has several
months' worth of gallium in stock because it had long
anticipated some form of trade crisis and has little else it can
do to react, Harz said.
    Automakers are also in a dilemma over whether they can
continue to rely on a metal which had been seen as a game
changer for electric vehicles.
    Harz said his Chinese suppliers were providing authorities
with data needed to obtain export licences. 
    They have estimated that deliveries will stop when the
export controls take effect on Aug. 1 and resume about a month
later when licence requests have been processed, though no
reliable information is available.
    Harz does not believe that China will disrupt gallium trade
flows over the next few years because that would quickly damage
its own electronics industry.
    The CEO added he viewed China's move for now as "sabre
rattling", because the world's leading makers of power
amplifiers, which boost radio signals so that smartphones can
communicate with cell towers, are based in the United States. 
    Freiberger consumes several dozens of tons of gallium per
year, making the raw material its largest single cost.    
    ($1 = 0.9132 euros)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Pentagon has strategic germanium stockpile but no gallium
reserves     urn:newsml:reuters.com:*:nL1N38S178
FACTBOX-China's major germanium and gallium producers   
 urn:newsml:reuters.com:*:nL4N38T1I0
FACTBOX-Where are germanium and gallium produced, what are they
used for?     urn:newsml:reuters.com:*:nL1N38Q0Q2
FACTBOX-Companies respond to China's curbs on gallium and
germanium exports     urn:newsml:reuters.com:*:nL1N38T0G7
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Ludwig Burger Editing by Matt Scuffham and Mark
Potter)
 ((ludwig.burger@thomsonreuters.com; +49 30 220133634;))