RESEARCH TRIANGLE PARK – Wolfspeed CEO Gregg Lowe has been dealing with China on export issues for years – dating back to 2019 when his company’s name was still Cree. Guess what. They are back.

Lowe was in Japan on Monday to announce a huge semiconductor deal with Renesas Electronics Corp that brings the Durham-based semiconductor maker $2 billion that will help finance the construction of its new plant in Chatham County. That same day,  China said it will ban export of key materials needed to build chips.

“China has hit the American trade restrictions where it hurts,” Peter Arkell, chairman of the Global Mining Association of China, told Reuters.

Treasury secretary Yellen calls out China over treatment of US companies

Both Wolfspeed and Triad-based chipmaker Qorvo could suffer from a ban on gallium especially. The other material on China’s list is germanium. The export ban is to take effect Aug. 1. On its website, Wolfspeed notes “Gallium nitride (GaN) on Silicon Carbide (SiC) technology solutions … enable high performance RF systems designs.” The new foundry being built in Chatham County will be the world’s largest silicon carbide production facility, it says.

Wall Street investors are watching – and some damage has already been done to both companies.

Wolfspeed (Nasdaq: WOLF) jumped 15% on the chip supply deal but have declined since then $8 a share.

Qorvo (Nasdaq: QRVO) shares have traded down $7 over the past two days to a low of $96.10.

Chip war escalates: China bans key metal exports to US – one used by Wolfspeed

Neither Wolfspeed nor Triad-based Qorvo are talking but both are at risk at being hurt by China’s ban announced Monday on certain metals used in semiconductors – the bread-and-butter of both Carolina companies.

Treasury Secretary Janet Yellen arrived in Beijing on Thursday to talk trade and other issues with the Chinese government. Wolfspeed and Qorvo are likely to follow discussions closely. She protested China’s treatment of U.S. companies in remarks disclosed early Friday.

Wolfspeed and Qoro utilize gallium in producing microchips for use in radio frequency products. They have yet to respond to media inquiries about the potential impact of a ban.

“China export controls may impact directly U.S.- and Euro-based manufacturers of gallium nitride (GaN) materials and buyers of these materials for the processing of compound semis,” wrote researchers at Wells Fargo.

China account for some 94% of the global gallium supply, notes Bloomberg News.

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The 2019 problem

Let’s go back to 2019 when Lowe was asked about China during a Cree conference call. 

“I just, I’m trying to understand broadly if Cree and Chinese market completely disengage what your business looks like,” Joseph Osha of JMP Securities asked Lowe after earlier comments from the Cree execs made clear their business in semiconductors, radio frequency devices and LEDs were taking a variety hits.

“Joe, I think that’s a great question. And it’s one that we certainly are addressing internally as well. And what I would say is any semiconductor company has to ask that same question because a substantial portion of the semiconductor market is in China, and a substantial percentage of the growth is there as well,” Lowe replied.

“So obviously, I think nobody would be fair to say, well, it wouldn’t matter if we – just China never came back.

“Of course, it would matter. It’s a big percentage of the semiconductor market, and a growing percentage of it. So it’s – it certainly would have an impact. I think there’s no question about that.”

‘Healthy economic competition’

On the ground in Beijing, The Associated Press reports that the debate is on.

The United States wants “healthy economic competition” with China but considers some of Beijing’s trade practices unfair, the official said. They said Yellen would detail those concerns in meetings with Chinese officials.

The official cited this week’s announcement of Chinese export controls on gallium and germanium as an example of policies about which Washington wants more information. The announcement jolted South Korea and other countries whose industries use Chinese supplies of the metals.

Washington wants to “promote resilient supply chains” and guard against excessive reliance on suppliers in critical areas but doesn’t consider that to be decoupling, the Treasury official said.

What if China ‘just never came back?’ Cree CEO warns of trade war, Huawei ban impact