China tightens its grip on Rare Earths: Implications for Global Semiconductor Supply Chains and Strategic Technologies
- Gabriele Iuvinale
- 3 giu
- Tempo di lettura: 5 min
China is tightening its control over rare earths, crucial elements for the high-tech industry, in response to restrictions on chips imposed by the United States. This has caused prices to soar, with dysprosium and terbium seeing increases of more than 200 percent.
Beijing has a near monopoly on the refining of rare earths (90 percent of global capacity) and many other critical minerals, consolidating its dominance. This dependence is alarming for the U.S., particularly for defense (F-35 fighter jets, submarines) and the automotive industry, which is facing factory closures due to lack of rare earth magnets.
Despite attempts to build alternative supply chains, the U.S. is struggling because of the huge investment needed, while China continues to improve mining and refining technologies. Chinese restrictions are already causing supply delays, and European industries, such as the German automotive industry, are sounding the alarm.
Rare earths have become a powerful “trump card” for China in the trade war, highlighting a growing strategic vulnerability for dependent countries.
As the trade war between China and the United States escalates, a crucial geopolitical weapon has emerged with force: rare earth elements. Beijing, in response to American restrictions on chips and semiconductors, is exerting increasingly tight control over the export of these strategic elements, triggering a wave of concern and panic in global markets and dependent industries. This move is not merely a tactical retaliation, but a clear signal of China's ability to influence global supply chains in high-tech sectors.
Soaring Prices and the "Great Earthquake" in the Market
Since April of this year, the rare earth market has experienced an unprecedented surge. Dysprosium, for example, has tripled in price, reaching $850 per kilogram, while terbium shot up from $965 to $3,000 per kilogram, a cumulative increase of over 210%. This sudden volatility in a usually stable market is a direct consequence of China's new export policies.
Export restrictions on seven key items are directly hitting the U.S. sweet spot and, as a result, the global industries that rely on these raw materials..
China's "Iron Wall" of Control
China holds an almost complete monopoly on rare earth refining, controlling approximately 90% of global capacity. This dominant position is not limited to rare earths but extends to a wide range of critical minerals essential for energy transition and advanced technologies. According to the "Global Critical Minerals Outlook 2025" report by the International Energy Agency (IEA), China is the leading refiner for 19 of the 20 key minerals analyzed by the agency, accounting for about 70% of the global market share.
This concentration has further strengthened from 2020 to 2024, creating true "iron walls" in the supply chain. For electric vehicle batteries, for instance, China controls most of the processing capacity for lithium (69.7%), manganese (94.6%), phosphorus (73.4%), and graphite (95.3%). Specifically, in graphite refining, China holds over 95% of the global production capacity for battery graphite, maintaining a near monopoly in the processing of natural spherical graphite and high-purity graphite. This is in addition to 45% of the world's refined copper.
US Strategic Dependence and Industry Implications
US reliance on China for rare earths is alarming. Between 2020 and 2023, the US imported 70% of its rare earth compounds and metals from China. This dependence is particularly critical for the national defense and high-tech military sectors. For example, each F-35 Lightning II fighter jet contains over 440 kilograms of rare earths, a Virginia-class submarine requires 4,200 kilograms, and an Arleigh Burke-class guided-missile destroyer approximately 2,359 kilograms.
But it's not just the defense sector that's vulnerable. The automotive and robotics industries in the United States are already suffering from this "scarcity." The Alliance for Automotive Innovation, representing giants like General Motors, Toyota, and Volkswagen, has warned that the shortage of rare earth magnets could lead to the closure of car factories within weeks. These magnets are essential for a wide range of components, from automatic transmissions to sensors, alternators, and electric motors.
Even in the field of artificial intelligence and robotics, rare earths are fundamental. Small yet powerful electric motors, necessary for the flexibility of humanoid robots, require rare earth magnets. Elon Musk even pointed out that the shortage of rare earth magnets could delay the production of Tesla's Optimus Prime robot.
The Unsuccessful Search for Alternatives and China's Technological Advantage
Despite US attempts to develop its own rare earth industry, rebuilding this complex supply chain would require infrastructure investments in the hundreds of billions of dollars, an undertaking currently unrealistic.
Meanwhile, China continues to strengthen its technological advantage in rare earth extraction and refining. In January 2025, the Guangzhou Institute of Geochemistry announced an innovative electric extraction technology for rare earths that promises to increase the recovery rate by over 95%, reduce the use of leaching agents by 80%, shorten extraction times by 70%, save 60% of electricity, and reduce ammonia nitrogen emissions by 95%. These advancements not only improve production efficiency but further solidify China's dominant position.
Immediate Consequences and Calls for Intervention
Chinese restrictions are already causing significant disruptions. The VDA (German Association of the Automotive Industry), through its president Hildegard Mueller, has reported delays in export license approvals and customs clearance, preventing suppliers from producing essential components for the automotive industry. Diplomats and business executives from India, Japan, and Europe are urgently seeking meetings with Chinese officials to accelerate export approvals. Bosch, a major German automotive component manufacturer, has also stated that China's stricter licensing procedures have put its suppliers in a difficult position, warning that "if the situation does not change quickly, the possibility of production delays or even interruptions will be inevitable."
Conclusion: A Geopolitical "Trump Card"
In this complex geopolitical landscape, China's control over key minerals and supply chains has not only not weakened but has strengthened, as highlighted by the IEA. Rare earths have become a powerful "trump card" in the trade war, with China playing it with determination. The "suffering from scarcity" is spreading throughout the US industrial sector and beyond, confirming that global dependence on Beijing for these critical materials represents a growing strategic vulnerability.
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