By Ludwig Burger
FRANKFURT (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 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)