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Why A Recent Chinese Trade Policy Is On Casino Game Manufacturers’ Radars

Written By Derek Helling | Updated:
computer semiconductors represent the necessary components of supply chains crucial to the operation of casino games

A plot point of the 2009 film “Avatar” was the greed of humanity over a precious metal vital to technology. While the capitalist and imperialist ambitions of nations like the United States make that premise not so far fetched, other elements bring the storyline even closer to reality.

Those elements include the vital role that semiconductors play in daily life around the globe. Furthermore, the raw materials essential to manufacturing semiconductors are not only precious but quite consolidated. Thus, governments who control those materials wield great power.

A recent action by one of those governments likely merited the attention of people in many industries. While that action could have little if any immediate impact, it does demonstrate the need for manufacturers of devices that use semiconductors to prepare for the worst while hoping for the best.

The periodic table, casinos, and you

Two of the symbols on the periodic table of elements represent metals that are essential to the production of semiconductors. In addition to silicon, those are gallium and germanium.

Gallium and germanium aren’t as abundant around the planet as the semiconductors they are used to create, though. In fact, they are quite concentrated. According to Reuters‘ Andy Home, China controls 98% of the production of “low-grade primary gallium” and 60% of the same for germanium.

As Home points out, that makes many other countries dependent on Chinese exports of those materials. Those exports are the focus of recent policy changes from China’s government as well.

Clement Tan reported for CNBC that China essentially added more paperwork and is collecting more information about gallium and germanium exports moving forward. In order to receive a license to export the metals, exporters will have to identify the recipients, how they will use the metals, and who will ultimately use the products the metals are used to create.

While this shouldn’t curb any exports immediately, the Chinese government seemingly did not make the move just to give regulators more work to do and data to collect. These new requirements are somewhat of an answer to similar moves by the United States earlier this year.

The political chess over semiconductors

In October, the United States established new trade rules that limit exports to China of other materials necessary to turn gallium and germanium into microchips. Since then, US officials have also been trying to sway other nations to do the same.

The Netherlands have responded positively to those efforts, introducing similar rules. The motivation is simple; if China becomes not only the dominant source of metals necessary to produce semiconductors but a large producer of those microchips as well, the nation will wield tremendous leverage in international affairs.

Thus, it’s possible to read China’s new regulations on gallium and germanium exports as a reminder that at any time the Chinese government could theoretically cut the rest of the world off from its supply of those metals.

Given the current supply chain, that would significantly stymie manufacturing of all products that require semiconductors to function. Furthermore, maintenance of and updates for existing products could suffer as well.

In 2023, that includes hundreds of consumer goods. Casino games are part of that economy. That includes not only slots and video poker but electronic table games as well. On a larger scale, the computers gamblers use to track player rewards, obtain cash, and redeem playing slips also employ semiconductors.

The United States is taking further action to try to reduce dependence on Chinese gallium and germanium. To what extent that could alleviate all concerns remains murky at best, though.

What the United States is doing to increase domestic supplies

Nearly a year ago, the United States government enacted the CHIPS and Science Act. Among the objectives of the legislation is to increase domestic production of semiconductors. Currently, domestic production of microchips stands at just 12% of global productivity.

The ambition is admirable and valid. However, experts have expressed doubts about turning that ambition into reality.

Yossi Sheffi, who is a professor of engineering at the Massachusetts Institute of Technology, told Lucas Mearian of ComputerWorld that he “believes the US won’t likely reduce its dependence on other countries for chip manufacturing…as the chances of” the US “persuading companies to move their manufacturing operations back home are very low.”

Even if the US is able to convince more manufacturers to operate within its borders, that doesn’t address the raw materials issue, Sheffi added.

“The most challenging factor is the need to move the entire supply chain, not just the final manufacturing stages, but [also] sources of raw material, expert suppliers, leading equipment makers, etc. The manufacturing of any product, at scale and at competitive quality and prices, requires entire ecosystems, or clusters, of multiple companies and it is a long-term Herculean effort to move everything.”

In a climate where a supply chain disruption could occur at any time and without notice, the companies that have done all they can to prepare will be best-suited to weather such disruptions. Gaming companies might be among them.

Are gambling companies prepared for a semiconductor shortage?

Near the end of the semiconductor supply chain are companies that manufacture devices like gaming terminals. They aren’t unaware of potential challenges. Rather, they are exploring contingency options. A statement from one such provider of gaming devices, International Game Technology (IGT) alludes to that preparation.

“IGT slot machines use similar electronics to those used in modern computers and appliances. There isn’t anything specific to the slot machines that would make them more susceptible to disruption than any other products in those categories. We consistently monitor for disruptions to electronic component supplies and explore alternative sourcing options.”

To the degree that they can control their circumstances, gaming companies are exploring other ways to keep their businesses moving should the supply chain of semiconductors in the United States dry up. The US government is undertaking similar efforts. Barring drastic changes, though, the overall stability of that supply chain will depend on political stability between China and the United States.

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Derek Helling Avatar
Written by
Derek Helling

Derek Helling is the assistant managing editor of PlayUSA. Helling focuses on breaking news, including finance, regulation, and technology in the gaming industry. Helling completed his journalism degree at the University of Iowa and resides in Chicago

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