Wrapup 1: VW ready to deal with China metal curbs if needed, chipmakers play down fallout

Visual Photonics Epitaxy Co

06/07/2023 10:54

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      VW says monitoring situation on metals markets
    

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      Chipmakers WIN, TSMC, NXP see no immediate impact
    

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      Fears China will also restrict rare earths exports
    

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      U.S. Treasury Secretary Yellen visiting Beijing 
    

  
    By Ben Blanchard and Jan Schwartz
       TAIWAN, July 6 (Reuters) - Volkswagen said it is
monitoring the situation on metals markets after China imposed
export restrictions on two minor metals used in semiconductors
and electric vehicles, while some chipmakers on Thursday played
down the potential damage to supplies.
    Fears are growing that more curbs on strategic exports
including rare earths could be coming after a top Chinese trade
adviser said on Wednesday that the limits on gallium and
germanium, effective Aug. 1, were "just a start". 
    The abrupt announcement, days before Thursday's arrival in 
Beijing of U.S. Treasury Secretary Janet Yellen for a visit,
sent some companies scrambling to secure supplies of the two
metals and stirred concerns about a jump in prices. 
    It has also prompted more companies to re-think their
reliance on the world's No. 2 economy.
    VW, which relies on gallium and germanium for automotive
products, said it was "ready to take measures together with its
partners if necessary" but did not elaborate. The metals will
also play a role in future autonomous driving functions, a
spokesperson for the German carmaker said.
    The export curbs are likely to further strain U.S.-China
relations as the countries vie for dominance in semiconductor
and defence technologies.
    "If the talks between the two sides go well, many
restrictions could be loosened, but if the talks go badly, both
sides may put up more sanctions after Yellen goes home," said
Capital Securities Corp analyst Liao Chien-yu.
    Some industry players said the restrictions could leave 
China with a glut of the two metals, weighing on domestic prices
even as costs overseas jumped this week.
    Germanium is used in high-speed computer chips, plastics,
and in military applications such as night-vision devices, as
well as satellite imagery sensors. Gallium is used in radar and
radio communication devices, satellites and LEDs.
    Some larger chip manufacturers view China's export controls
on gallium as more of a warning shot about what economic pain
the country could inflict. 
    But if prices rise as restrictions take hold companies would
have another reason to shift supply chains.
    Taiwan's WIN Semiconductors  3105.TWO , which uses gallium
for optoelectronic devices, told Reuters only a "small number"
of substrates are purchased from China, with most of its
supplies coming from Germany and Japan. 
    Taiwan's TSMC  2330.TW , the world's largest contract
chipmaker, said it does not expect any direct impact on its
production from the moves.
    Taiwan is a major producer of chips used in everything from
smartphones and cars to fighter jets, supplying companies like
Apple  AAPL.O  and Nvidia  NVDA.O .
    Chipmaker NXP Semiconductors  NXPI.O  sees no material
impact on its business. NXP makes some chips for the auto and
communications sectors using gallium or germanium.

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EXPLAINER-China's rare earths dominance in focus after mineral
export curbs      urn:newsml:reuters.com:*:nL1N38R03S
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      NL8N38S1JL 
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 (Reporting by Reuters bureaus; Writing by Josephine Mason;
Editing by Catherine Evans)
 ((Josephine.Mason@thomsonreuters.com; +44 207 542 7695; Reuters
Messaging: josephine.mason.reuters.com@reuters.net))