· China's metal export restrictions on gallium and germanium may prompt some countries to diversify their supply chains.

· Louisa Moreno, the President of Defense Metals Corporation, stated that China may implement further restrictions, such as rare earth restrictions.

· "We may continue to see 'export restrictions,' which could affect other materials like rare earths, where China controls over 85% of the production..." - Louisa Moreno, President of Defense Metals Corporation.

China's export restrictions on the metals gallium and germanium could prompt some countries to diversify their supply chains away from China.

Stewart Randall, a Shanghai-based consultant at Intralink, told CNBC, "This could sound the alarm bells for countries to gradually establish production elsewhere."

Randall said, "If China does nothing, most countries in the world would be very happy to continue relying on China."

China's Ministry of Commerce announced last week that it would restrict the export of two metals, gallium and germanium, crucial to semiconductor manufacturing, starting from August 1. This move is seen as a warning to Europe and the United States in the advanced chip technology war.

According to data from the Critical Materials Alliance, China produces 60% of the world's germanium and 80% of the gallium.

Both the European Commission and the United States have expressed concerns over China's planned restrictive measures.

"China stopping the metal exports is actually a warning. It reminds European countries that they need to have their own supply chains," said Brady Wang, Associate Director at Counterpoint Research, to CNBC.

China may implement further restrictions

Louisa Moreno, the President of Defense Metals Corporation, expects that China will further restrict metal exports, which may include rare earths.

Rare earths are crucial for high-tech consumer products such as smartphones and military equipment like radar systems. Rare earths consist of 17 elements, including scandium, yttrium, and lanthanides.

"We may continue to see (export restrictions), which could affect other materials like rare earths, where China once again controls over 85% of the rare earth production," Moreno said on CNBC's "Street Signs Asia" program on Tuesday.

In 2010, China stopped exporting rare earths to Japan due to territorial disputes. China also threatened to stop exporting rare earths to the United States in 2019.

Wang from Counterpoint stated, "The impact of (metal restrictions) in the short term is not significant, but if China implements (restrictions on other critical materials), it will be a long-term problem."

Randall from Intralink said, "China also needs to be careful because stopping exports can hurt Chinese companies' interests, and they will also lose foreign customers."

Diversification away from China

A key materials supplier stated that factories are preparing to start producing gallium. The two metals targeted by China's upcoming restrictions are not naturally occurring but are typically generated through the refining process of other metals.

"We've received a lot of calls from customers, and there's a lot of activity there. We're engaging with the market to make sure that we can secure supply," said Ross Berntson, President and COO of Indium Corporation, on CNBC's "Squawk Box Asia" program on Wednesday.

Indium supplies key materials like gallium and germanium to global electronics and chip companies.

Berntson said, "There are about 10 factories right now that could start producing gallium... If we can get these production facilities up and running, we'll have ample gallium outside of China."

While China produces the majority of gallium and germanium globally, it is not the only producing country.

According to a 2021 study by the Indian government, Russia, Ukraine, Japan, and South Korea also produce gallium. Canada, Germany, Japan, Slovakia, and the United States recover gallium from both new and old scrap.

Additionally, according to data from the United States Geological Survey, Belgium, Germany, and Russia can produce germanium. The United States also has the ability to recover germanium from both new and old scrap.

"Gallium and germanium are not unique metals. China is the major supplier of these metals, which helps keep the metal prices low," said John Strand from Strand Consult, a telecommunications consulting firm.

Clete Willems, Partner at Akin Gump Strauss Hauer & Feld law firm, stated on CNBC's "Squawk Box" program, "My view is that even if they hit here hard, the impact on prices will be greater than the impact on overall supply."