Delays in Germanium Customs Pressure Delivery Times for Taiwanese Equipment

Delays in the customs clearance of germanium and quartz-based materials from China are putting pressure on the delivery timelines of Taiwan's optical, aerospace, and semiconductor equipment industries. The disruption is affecting the procurement of upstream materials and precision components before halting the production of finished semiconductors.

Nikkei Asia reported that delays in customs clearance for germanium and quartz-based materials, as well as some permanent magnets heading to Taiwan from China, are exacerbating supply chain bottlenecks for Taiwanese manufacturers. Industry insiders mentioned that shipments from Chinese suppliers are being held up longer at customs, with some companies losing orders due to their inability to meet customer delivery deadlines.

Germanium is used in infrared lenses, optical fibers, and photonics, while quartz is classified as a basic material necessary for the manufacturing processes of optical components and semiconductors. In the precision equipment industry, the quality and purity of materials impact not only delivery timelines but also product performance.

An executive from a chip equipment manufacturer reported that delays in the export of quartz from China have extended product delivery times by several months. He noted that finding alternative sources for high-quality, high-purity quartz outside of China is challenging. This issue is not just about pricing; it involves certified suppliers and quality verification as well.

This situation resembles an administrative delay layered on top of existing controls on key minerals rather than a new embargo. The Chinese Ministry of Commerce announced in July 2023 that it would implement a licensing system for the export of germanium and gallium-related items starting August 1 of the same year. At that time, the ministry explained that these items could be used for both military and civilian purposes, and exports that meet the regulations would be permitted.

Germanium and gallium have repeatedly been mentioned in discussions about China's control over key minerals. Key minerals are resources that are essential for industry and national security but have a high risk of supply disruption due to concentrated production and refining capabilities in specific countries or regions.

Taiwan's Ministry of Economic Affairs does not view this situation as a new export control. In a statement, the ministry explained that the problem arose from China prolonging existing administrative procedures, and it indicated that the industry could mitigate "short-term impacts" by diversifying procurement sources. The government's assessment emphasizes delays in customs and licensing procedures rather than an official embargo.

However, industry testimonies reveal that alternative supply chains are not adequately prepared. If China utilizes customs delays and licensing procedures instead of imposing an official ban, the announced measures may not exist, but companies will still face immediate pressure on delivery timelines and inventory management. There is an analysis suggesting that supply chain risks may manifest more quickly in the speed of administrative processing than in changes to legislation.

Delays in permanent magnets have also been mentioned. Permanent magnets are magnetic materials used in motors and precision machinery, which could affect the supply chains of subcomponents for optical, aerospace equipment, and manufacturing facilities. Similar to germanium and quartz, the greater the dependency on specific suppliers, the more pronounced the impact of customs delays will be.

For Korean readers, this issue is not just a problem for individual Taiwanese companies but can be interpreted as an upstream risk in the supply chain for AI semiconductors and precision equipment. Taiwan's economy has increasingly become reliant on AI semiconductors. If the procurement of materials and components is disrupted, it may not immediately lead to production delays for finished products, but it could place a burden on equipment delivery and expansion schedules.

The semiconductor supply chain does not operate solely on post-processing such as wafer production and packaging. Optical components, high-purity materials, and precision parts for equipment must precede to maintain process stability. The reason this customs delay is noteworthy is that it highlights bottlenecks upstream of finished chips.

There is still insufficient evidence to conclude that material delays will directly lead to production delays for finished products. The Ministry of Economic Affairs in Taiwan believes that short-term impacts are manageable, while the industry states that securing alternative sources is not easy. The temperature difference between the government and the field may become apparent in future inventory management and responses to customer delivery deadlines.

China's control over key minerals operates through a licensing system and review procedures. Typically, in this structure, even if exports are not completely banned, the procurement schedules of companies can vary depending on review periods, document supplementation, and customs processing speeds. From the perspective of companies, actual logistics flow becomes a more direct risk signal than official announcements.

It remains to be seen whether this delay will extend beyond germanium, quartz, and permanent magnets to a wider range of items. The currently confirmed issue is not a new embargo from China, but rather that existing administrative delays are manifesting as delivery burdens on Taiwan's optical, aerospace, and semiconductor equipment supply chains.

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