In the wake of China's unexpected enforcement of gallium export controls starting in August, industries worldwide, particularly the semiconductor sector, have plunged into a state of frantic stockpiling of speciality semiconductor wafers made from the metal.
As the world's largest gallium buyer, German-based Freiberger Compound Materials finds itself in the centre of this global upheaval, as reported by Reuters.
Freiberger, a major player in the manufacture of wafers for mobile phone radio signal amplifiers and optical electronics, heavily relies on Chinese suppliers for its gallium needs.
As the company accounts for an estimated 10% of the global gallium output, the forthcoming export controls have triggered a ripple effect, unsettling their supply chain and prompting an increase in inventory levels.
Industry on edge
Responding to Reuters, Freiberger's chief executive Michael Harz said: "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."
Gallium stockpiles
Over the past decade, Chinese gallium companies have pushed most of their international competitors out of the market by offering significantly lower prices.
With annual sales ranging from US$77 to US$88 million, Freiberger holds a 65% market share in gallium arsenide wafers used for smartphone power amplifiers, vying against Japan’s Sumitomo Electric and several smaller Chinese manufacturers.
Moreover, gallium arsenide is a crucial component in red LEDs and red light sensors.
Automakers are grappling with the uncertainty as gallium's significant potential in electric vehicles could be at risk.
Harz, however, revealed that Freiberger had long anticipated a potential trade crisis, which led them to maintain several months' worth of gallium stock.
"Sabre rattling”
Chinese suppliers are gathering data to secure export licences and have projected that deliveries might halt when the export controls kick off in August, resuming about a month later.
Despite the prevailing uncertainty, Harz is optimistic about the future of gallium trade flows, asserting that disrupting them would have immediate repercussions on China's own electronics industry.
He interprets China's move as "sabre rattling", considering that the leading power amplifier manufacturers, crucial to smartphone connectivity, are US-based.
With Freiberger's annual gallium consumption tallying in the dozens of tons, the raw material represents the company's largest single cost, further highlighting the critical role of this metal in the global semiconductor industry.