Friday, January 3, 2025

How Will China’s Export Ban Impact the Semiconductor Industry?

By Jeff Brown, Editor, The Bleeding Edge
I sincerely hope everyone had an enjoyable couple of weeks over the holidays. It's fabulous to be writing to you in 2025 – I'm glad we have 2024 behind us. Much more exciting things ahead this year.
We had a wide range of exciting topics this week for our AMA today.
We explore mRNA technology, a company posing as a quantum computing company, China's materials export ban on the U.S. – and its impact on the semiconductor industry – and even some useful advice on which Teslas to buy, for anyone interested in a self-driving car.
I hope you find the information interesting and useful.
Best wishes for a prosperous and happy new year,
Jeff
How Will China's Export Ban Impact the U.S. Semiconductor Industry?
Hi, Jeff.
Just wondering what the impact of China's export ban on gallium, germanium, and antimony will be for U.S. semiconductor companies and for everyone else in the country. Any thoughts on this matter?
– Robert F.
Hi Robert,
These kinds of geopolitical issues can be tricky. On the surface, it can look like a disaster. And not surprisingly, some of the reporting on the topic proclaims the shutdown of the U.S. semiconductor industry.
But consistently in those types of media articles, they are always light on details and clearly don't understand the semiconductor industry.
The reality is that China already had a partial ban on gallium and germanium in 2023. And in August 2024, China instituted a partial ban on antimony materials. This most recent ban is an extension of those previous bans.
At a high level, it looks bad. China produces 90% of the world's gallium, 60% of the world's germanium, and almost 50% of the world's antimony materials. It's not so much the availability of the raw materials. China is simply where the majority of the metal extraction and processing takes place. It's a dirty business, and most Western governments have outsourced the work.
To put things in perspective, China didn't ban silicon (for example). It couldn't. But if it could, it would shut down the whole industry. The reality is that the semiconductor industry can still run, even with the current bans. And if we dig a little deeper, we can see China appears to be targeting certain sectors that rely on these materials for semiconductor and optics technology production.
Gallium is used in the gallium nitride (GaN)-based semiconductors typically used in high-power applications.
GaN semiconductors are becoming more important in managing the high-power requirements in massive AI data centers, as well as higher-power wireless networks.
Germanium tends to be used more in optics applications like fiber optic systems. Antimony is less common in the semiconductor industry and is typically used in specialized applications related to the aerospace industry.
China's choice of materials for the bans tells us it is trying to slow down the U.S. in its aerospace and artificial intelligence (AI) markets. Defense and AI. It makes a lot of sense, doesn't it?
But with all that said, what's the real impact? In situations like these, the most common effects are increased prices and longer lead times. Let's have a look at some of the prices:
Price of Antimony Trioxide FOB
The price of antimony trioxide has more than doubled in the last year.
And below is the chart of germanium dioxide which has risen more than 50% in the last year.
Price of Germanium Dioxide delivered to U.S.
As for gallium, it rose this fall but is back down to levels where it was about one year ago.
So, the price of some of the inputs has risen, but so far, the actual increase in end-product prices shouldn't be bad at all. And the materials are currently available to keep semiconductor and optics manufacturing running.
And there is some additional nuance in the semiconductor industry. I know I've been writing a lot about the new onshoring of semiconductor manufacturing in the U.S. and the CHIPS Act, which has been incentivizing semiconductor companies to manufacture semiconductors onshore.
But the whole supply chain for semiconductors is quite complex.
Global Semiconductor Production Process | Source: U.S. Government Accountability Office
Chips are designed in the U.S. Raw ingots that eventually form the wafers upon which semiconductors are etched are made in Japan. Most advanced semiconductors are manufactured in Taiwan and then sent to Malaysia or Thailand for assembly, testing, and packaging.
Those packaged semiconductors are then shipped to a manufacturing plant to be incorporated into the end product (electric vehicles, consumer electronics, industrial electronics, networking gear, etc.).
And after all that, the end product is shipped off to its final market.
The ban doesn't prohibit Taiwan from purchasing these materials, so most of the semiconductor industry would be unaffected by a full ban for the U.S.
Now, if China had complete control over Taiwan that would be a different story…
The reality is that China hasn't provided much detail on how the ban will be managed. Does it have the ability to force Taiwanese companies to refuse U.S. semiconductor company orders for their chips? Not at the moment.
China has been successful in finding ways around the U.S. bans for accessing the most advanced semiconductors for AI and semiconductor manufacturing equipment. I only mention that as an example to show how a complete and total ban is extremely difficult to manage for any country.
These bans will be used as negotiating chips between China and the U.S. China wants certain things from the U.S. The U.S. wants China to stop manufacturing and shipping fentanyl into the U.S. across the southern border, etc.
I expect President Trump to be at the negotiating table with China within his first 100 days and we'll have a lot more clarity on these tariffs and export bans as both sides figure out what is most important to them.
And the reality is that China's economy is struggling right now, as is most of Western Europe. China needs a healthy economic relationship with the U.S. for its export-driven economy.
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Where Does Arqit Fit in the Quantum Frenzy?
Hi Jeff,
I found this article very interesting and useful but I wonder if you can comment on the technology provided by Arqit Quantum and the problem it addresses.
– Ron G.
Hi Ron,
Arqit Quantum (ARQQ) is actually a cybersecurity company, not a quantum computing company. But the fast money didn't care much, as we can see in Arqit's stock chart below.
Arqit's technology is a "quantum-safe symmetric key agreement encryption platform." An easy way to think about this is that Arqit is a more advanced encryption technology compared to what is most commonly used today, like RSA.
Arqit's whole selling point is it can completely secure any communications against any form of cyberattack, including one using a quantum computer. Arqit positions itself as quantum-proof, but I would categorize Arqit's technology as quantum-resilient.
So it's not a quantum computing company, it just makes quantum-resilient encryption software.
Arqit went public in September of 2021 via a reverse merger with a SPAC. It was a highflier and then it collapsed, dropping below $4 this year.
Since it was caught up in the quantum frenzy because of its name, it now trades at a $457 million valuation, which is 1,523 times its fiscal year 2024 sales of $300,000. How's that for overvalued?
Even against fiscal year 2025 (ending September 30, 2025) forecasted sales of $5.5 million, it's still trading at 83 times FY2025 sales.
It reported $18.7 million in cash last quarter, and it's burning more than $30 million in cash every year. Put simply, it's almost out of money and will have to raise capital quickly.
I expect it will announce a secondary offering within weeks in hopes of raising enough money to stay in business. I also expect this share price to experience a sharp correction.
Is mRNA Technology Good or Bad?
I just read Jeff's issue of The Bleeding Edge entitled AI Winners and Losers and he addressed questions from readers about the new administration and RFK Jr. in particular.
In your response, you referenced the mRNA vaccines and how they were unsafe and that you expect him to put a stop to the use of self-replicating mRNA technology. If I recall correctly, a few years ago you were praising the use of this emerging technology in the medical field and how helpful it will be. So why are you now bashing it?
– Kevin W.
Hi Kevin,
I really appreciate you writing in with this question. It gives us the chance to dig deeper into some of the nuances regarding this topic.
I am still excited about the potential of mRNA technology with respect to therapeutic applications. The ability to use this technology to help the human body create proteins it needs to fight an illness like cancer or to create proteins the body needs to function normally has great potential.
But we'll have to separate the issue of the underlying technology – mRNA – to the application of mRNA with the COVID-19 "vaccines." We can be both excited about the technology and also recognize the complete failure of one application of the technology – the COVID-19 mRNA "vaccines."
First and foremost, the COVID-19 "vaccine" is not a vaccine. It doesn't provide immunization against COVID-19.
When we receive our vaccines for polio or tuberculosis, we receive an attenuated form of the actual virus. It has been weakened so that it is not harmful to our bodies, and it allows our immune system to develop natural immunity.
The COVID-19 mRNA "vaccines" do not help our systems develop immunity. It doesn't expose our bodies to the virus as a whole, just a spike protein. During the pandemic, the CDC changed the definitions of immunization and vaccine TWICE to account for the ineffectiveness of these experimental drugs.
COVID-19 mRNA "vaccines" did not stop infection, did not stop replication of the virus, and did not stop transmission to others.
To play my own devil's advocate: "But Jeff, the mRNA vaccines reduced the severity of the symptoms of COVID on the body."
There's not a single randomized controlled trial that proves that position. And it's actually the opposite – and it's even worse: The more shots and boosters one takes, the weaker our immune system gets. Those who take boosters are two to three times more likely to catch COVID-19 again compared to those who developed natural immunity.
Even worse than that, extensive research has now shown that these COVID-19 mRNA shots cause the human body to create an excess of the IgG4 protein, which dramatically reduces the body's ability to fight cancer.
This is almost certainly why we have seen such an explosion of turbocancers and excess deaths.
And just a few days ago, research out of Yale was published that found that the COVID-19 spike protein – which the COVID mRNA "vaccines" coax our bodies into producing – remained in patients for 700 days after taking the COVID mRNA shots. This is not "immunity." This is not supposed to happen, and it is extremely dangerous.
The mRNA-induced spike protein has also been proven to spread into all of our vital organs. This is one of the reasons why we are seeing so many severe adverse events.
It's also worth noting that "experts" told us that the mRNA shots would remain local to the injection, not spread to organs, and the spike protein would leave our bodies in days. It was all a complete lie.
It has also been proven that there has been DNA contamination in the manufacturing of the COVID mRNA "vaccines" which is also extremely dangerous. At high enough levels, DNA contamination can lead to DNA integration.
Every month that passes, the research on this topic just brings more and more bad news. It's horrifying. But we really don't have to read all the research like I do. One chart tells it all:
Source: OpenVAERS
This is a historical chart of the CDC's vaccine adverse event reporting systems (VAERS). This is where healthcare professionals report vaccine injury and death in order to identify if something is wrong. Clearly, something is very wrong.
What's more frightening is that the VAERS system only captures a very small fraction of all adverse events, since they are self-reported numbers only and do not capture full and accurate data. The real numbers are many multiples higher.
Below is a more detailed breakdown through November 29, 2024.
Source: OpenVAERS
A couple of years ago, a subset of my readers would have been sharpening their knives and pointing them in my direction by now, reading my response to this question.
I'd hope that by now, they'd have seen and learned enough to at least give pause and remain open-minded. My analysis on related topics turned out to be spot-on throughout the pandemic, and now there is data and research to prove it.
The truth is very well known now, and more and more physicians, scientists, and politicians are being open about it, sharing the data, and ultimately calling for the COVID mRNA "vaccines" to be pulled from the market immediately.
I've predicted that this will happen this year. The mountain of evidence is simply too large to ignore. The healthcare industry needs to be honest and focus on developing therapies for those who have been injured by the COVID shots.
Developing a drug isn't just about the underlying technology. The manufacturing process is critically important for quality and avoiding contamination, and the delivery mechanism plays a key role as well (note: lipid nanoparticles are used for the mRNA experimental drugs).
Just because this particular application of mRNA for the attempt to make a COVID-19 vaccine has been a horrible failure doesn't mean mRNA technology won't work for other applications.
Imagine if Dr. Alexander Fleming had stopped the development of the first antibiotic because it was unsuccessful at treating a common viral infection.
That's why understanding what went wrong with the COVID mRNA shots is so important. The industry can avoid duplicating those mistakes with respect to using mRNA technology for other therapeutic applications.
What Tesla to Buy for Full Self-Driving
Hey Jeff,
I was so happy to hear about Tesla's news and the newest version of FSD software. It feels like I've been waiting for a very long time for this. I have arthritis in my knees and hips so I can't stand driving. I do have a couple of questions though.
First, has Tesla put out which years will be able to support version 13 software? Second, I normally wouldn't even consider this, but I did some research and found out that Hertz is still selling their EVs. They only have the 2022/23 Model 3 vehicles available. I was curious if you have any thoughts about doing this instead of purchasing the latest model.
I'm sure you are going to get a lot of questions/comments from today's issue, but I would love to hear your opinion.
– Synthya G.
Hi Synthya,
This is a really smart question, I'm glad you asked.
The hardware versions in Teslas are directly related to what full self-driving (FSD) software can be used.
Hardware 3 – now known as AI3 – will be limited to FSD version 12.6 and won't be able to run version 13 and beyond.
In order to run version 13, Hardware 4 – now known as AI4 – is required.
That means that the following Teslas will have AI4:
  • Any Model S or X manufactured after March 2023
  • Any Model Y manufactured after May 2023
  • Any Model 3 manufactured in 2024
And I strongly recommend getting a Tesla with AI4 hardware. While FSD 12.6 is quite impressive, there is still a big gap between that and version 13.
I'll also recommend one more idea. If you can, sign up for a three-year lease with an AI4 Tesla Model 3. There are two reasons.
Over any given three-year period, the improvement in computational power changes dramatically. Teslas produced four years from now will have a lot more computational horsepower than something made in 2024. And when it comes to running a neural network responsible for making split-second decisions, this is a good thing to have.
The second reason is that the EV batteries do degrade in performance over time. After three years of usage, switching to a newer model ensures that you won't experience much of that degradation.
Good luck. You're in for a real treat. I can't tell you how much more relaxing it is to have my car do the driving for me.
That's all for this week's AMA.
We'll be back on Monday with your regular The Bleeding Edge. Have a great weekend.
Jeff

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