WASHINGTON, July 6 (Reuters) – The Pentagon holds a US strategic stockpile for germanium but currently has no inventory reserves for gallium, a spokesman said Thursday, after China announced export restrictions on the two metals used in semiconductors.
“The Department (of Defense) is taking proactive steps using Defense Production Act Title III authorities to scale up domestic mining and processing of materials critical to the microelectronics and space supply chain, including gallium and germanium,” he said. said the spokesman.
Germanium is used in high-speed computer chips, plastics, and 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.
China’s abrupt announcement on Monday of August 1 export controls on some gallium and germanium products, also used in electric vehicles (EV) and fiber-optic cables, prompted companies to struggle to secure supplies and raise prices.
While major defense contractors like Lockheed Martin Corp (LMT.N) may not buy gallium and germanium directly, they likely buy semiconductors from suppliers who source Chinese gallium and germanium, said Arun Seraphin, executive director of the Emerging Technologies Institute of the National Defense Industrial Association.
Restrictions on that supply potentially “slow production of DoD systems” or “increase costs,” he said.
However, Dak Hardwick, vice president of international affairs at the Aerospace Industries Association, said export restrictions are likely to have little near-term impact for defense companies, which tend to buy materials for critical systems well in advance.
L3Harris (LHX.N) said it “has made key updates within the supply chain” to avoid disruption, but did not specifically comment on the impact of the new restrictions.
China’s latest move has sparked a trade war with the United States and could potentially cause further disruption to global supply chains.
Hardwick said the Pentagon will eventually need to find alternative sources for gallium and germanium “whether it’s direct mining, direct manufacturing, direct refining or manufacturing, or from an outdated equipment recycling program,” adding that the restrictions could spur lawmakers US to increase investment in critical minerals.
Chinese President Xi Jinping, a day after the curbs were unveiled in a virtual address to leaders attending the Shanghai Cooperation Organization summit, called on nations to reject decoupling and avoid disrupting supply chains, state media reported.
Reporting by Idrees Ali, Phil Stewart and Valerie Insinna; Additional reporting by Rami Ayyub; Editing by Doina Chiacu, Mark Porter and Marguerita Choy
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