WASHINGTON (Reuters) - The Pentagon holds a strategic U.S. stockpile for germanium but currently has no inventory reserves for gallium, a spokesperson said on Thursday, after China announced export restrictions on the two metals used in semiconductors.
"The (Defense) Department is proactively taking steps using Defense Production Act Title III authorities to increase domestic mining and processing of critical materials for the microelectronics and space supply chain, including gallium and germanium," the spokesperson said.
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 controls from Aug. 1 on exports of some gallium and germanium products, also used in electric vehicles (EVs) and fibre optic cables, has sent companies scrambling to secure supplies and bumped up prices.
While major defense contractors like Lockheed Martin Corp (NYSE:LMT) may not buy gallium and germanium directly, they likely purchase semiconductors from suppliers who source Chinese gallium and germanium, said Arun Seraphin, executive director for the National Defense Industrial Association’s Emerging Technologies Institute.
Restrictions on that supply potentially “slows down the production of DoD systems” or “ratchets up the cost,” he said.
However, Dak Hardwick, vice president of international affairs at the Aerospace Industries Association, said the export restrictions will likely have little short-term impact for defense companies, which tend to buy materials for critical systems far in advance.
L3Harris said it "has made key updates within the supply chain" to avoid disruptions, but did not comment specifically on the impact of the new restrictions.
The latest move by China has ramped up a trade war with the U.S. and could potentially cause more disruptions to global supply chains.
Hardwick said the Pentagon will eventually have to find alternate sources for gallium and germanium “whether it's direct mining, direct manufacture, direct refining or production, or from a recycling program from obsolete equipment,” adding that the restrictions could spur U.S. lawmakers to increase investments in critical minerals.
China President Xi Jinping, a day after the curbs were unveiled in a virtual address to leaders attending the Shanghai Cooperation Organisation summit, called on nations to spurn decoupling and avoid severing supply chains, state media reported.