NEWS | September 28, 2023

With only 3 days left until the implementation of export controls, the Pentagon has commissioned the industry for gallium production, as this technology metal is essential for the defense sector.

US-Pentagon in Washington D.C. Gebäude mit Blick auf die Luft von oben.

In three days, it will be the first of August. From then on, China can theoretically reduce or completely halt the supply of Germanium and Gallium at any time. The Pentagon is prepared for such a scenario with Germanium. In case of any contingency, it has established a sufficient emergency reserve that can last for several months. However, the situation is quite different for Gallium. In this case, the American government is literally running dry. To be prepared for supply shortages, the Pentagon is therefore commissioning American and Canadian companies to extract Gallium from electronic waste and semiconductor production residues.

Company Obligation under the Defense Production Act

For this purpose, the Pentagon is invoking the Defense Production Act (DPA), a US law enacted in 1950 during the Korean War. This law allows industrial establishments to be obliged to produce goods that are essential for national defense. Gallium production orders are planned to be prioritized by the end of the year. There is already a collaboration in the works with Lockheed Martin Corp., an American defense and technology corporation. Although Lockheed Martin does not operate its own mines, it can extract Gallium from semiconductors sourced from various companies. According to a Reuters report, some of these companies’ sources are located in China. Recycling was not previously included in the DPA, but it is expected to be added to the law as part of an imminent amendment.

Gallium Indispensable for Defense Systems

The Defense Department keeps both the planned investment amount and the quantity of Gallium to be stockpiled confidential. However, what it cannot hide is the significant military utility of this technology metal: Gallium can conduct high voltages at high temperatures. It plays a crucial role in radar systems on both ships and land for defense against air attacks, projectiles, and drones. It is indispensable in defense technology as part of telecommunication equipment, semiconductor chips, and LEDs. Arun Seraphin, the director of the Emerging Technologies Institute, which is part of the National Defense Industrial Association responsible for military technology, shares this view. He believes that supply restrictions could slow down the production of defense systems or drive up the costs.

What other metals did the Pentagon forget to store?

The case shows that Gallium is more than just a “green” energy metal for electric cars and solar cells. The defense capability of entire continents depends on the quantity of available Gallium. An interesting question for investors could be: What other metals did the Pentagon forget to store? Rhenium for vehicle armor? Hafnium for nuclear submarines? Or the currently rising in price Indium for office screens? Apart from Gallium and Germanium, all these metals offer a good opportunity for private buyers to invest in the currently most attractive asset class in the market – and that too, largely tax-free.