China's Grip on Rare Earths Tightens, Squeezing US Tech and EV Sectors
New export controls on critical minerals for semiconductors and EV motors create significant supply chain uncertainty for American manufacturers.
China has tightened its grip on the global supply of critical minerals, implementing new export controls on rare earth elements (REEs) that are vital to the U.S. semiconductor and electric vehicle (EV) industries. The move, which affects materials like gallium, germanium, and high-performance magnets, is creating significant supply chain uncertainty and threatens to inflate costs for American manufacturers.
The new restrictions are the latest salvo in the ongoing U.S.-China tech rivalry and are seen as a direct response to American efforts to curb China's access to advanced semiconductor technology. For the U.S. semiconductor industry, the impact could be severe. REEs are essential for various stages of chip production, from wafer polishing to the creation of powerful magnets used in manufacturing equipment. The U.S. sources approximately , making it highly vulnerable to these new export licensing requirements.
The EV sector is also in the crosshairs. High-strength permanent magnets, which rely on rare earths like neodymium and dysprosium, are critical components in the high-performance motors that power electric vehicles. Without a stable supply of these materials, U.S. automakers could face production delays and be forced to use less efficient motor designs. The , further complicating efforts to build alternative supply chains.
In response, the U.S. government has been working to bolster domestic production and processing of rare earths. The Department of Defense has invested over to rebuild the domestic supply chain, but it will take years to reduce the heavy reliance on China. As the geopolitical tensions continue to simmer, the U.S. tech and automotive sectors must now navigate a new landscape of supply chain risks and potential price volatility for these indispensable materials.