Core Viewpoint - The article discusses the strategic implications of China's export controls on gallium, highlighting its critical role in the semiconductor and defense industries, and the potential economic impact on the U.S. and its allies due to reliance on Chinese supply [4][8][39]. Group 1: China's Export Controls - The G7 nations have reached a consensus to reduce imports of Chinese rare earths, but analysts believe this may not be sustainable as China holds significant control over gallium production and technology [4][8]. - China has implemented a systematic export control mechanism for gallium, which has led to a dramatic price increase in international markets, with Rotterdam's low-purity gallium price rising over 43% within a month of the controls [4][18]. - By mid-2024, China is expected to produce 98% of the world's low-purity gallium, making non-Chinese suppliers heavily reliant on Chinese raw materials [20][21]. Group 2: Strategic Importance of Gallium - Gallium is crucial for advanced semiconductors, LEDs, and defense radar systems, with the U.S. Department of Defense relying on gallium for over 11,000 components [5][39]. - The actual annual consumption of gallium in the U.S. is estimated to be around 200 tons when including gallium-based products, significantly higher than the official figure of 20 tons [5][36]. - China's control over gallium supply chains poses a risk to U.S. defense capabilities, as nearly 85% of gallium-related components in the defense supply chain involve Chinese suppliers [39][41]. Group 3: U.S. Response and Supply Chain Resilience - The U.S. must urgently develop alternative sources for gallium supply and extraction technologies to mitigate the risks posed by China's export controls [9][42]. - The U.S. government has begun to allocate funds for research and development in gallium extraction technologies, with a focus on enhancing domestic production capabilities [45][46]. - Collaborative efforts with allies such as Canada, Australia, and Japan are essential to diversify gallium supply chains and reduce dependence on China [49][50][51]. Group 4: Market Dynamics and Challenges - The gallium market is characterized by significant price volatility due to supply constraints, with prices reaching record highs following China's export restrictions [18][19]. - Non-Chinese producers face challenges in competing with China's cost advantages, particularly in gallium extraction technologies, which are largely unavailable outside China [32][34]. - The U.S. must implement supportive policies to encourage domestic production and ensure a stable supply of gallium, as market mechanisms alone may not suffice [43][44].