Highlights
- China controls over 90% of global rare earth refining capacity, creating a significant strategic risk for U.S. technological independence.
- U.S. semiconductor leadership is undermined by extreme dependency on Chinese rare earth mineral processing and imports.
- Rare earth elements are now considered national security assets, critical to advanced technologies in defense, clean energy, and AI.
In a sweeping geopolitical study published in the Pakistani Journal of International Affairs, Tan and colleagues deliver a sobering account of China’s rare earth element (REE) dominance and its tight coupling with the global semiconductor race. The study warns that America’s dependency on Chinese REEs—especially for refining and processing—poses a severe strategic liability as tensions escalate between the world’s two leading powers.
The authors dissect the techno-strategic imbalance: China commands over 90% of global rare earth refining capacity and roughly 69% of production, while the U.S. retains semiconductor design supremacy but lacks critical upstream mineral autonomy. Their conclusion is clear—without a resilient rare earth supply chain, the U.S. risks systemic paralysis in sectors as diverse as clean energy, defense, and AI.
Key Findings
Tan et al. document that China’s rare earth dominance is not a quirk of geology, but the result of decades-long industrial strategy. China hosts 37% of known REE reserves, but its state-owned giants—China Rare Earth Group and Northern Rare Earth High-Tech Co.—refine the lion’s share of the world’s supply. These firms not only control extraction but lead in digitized, eco-friendly processing—an edge the West has largely ceded.
The paper recounts how China’s 2010 embargo on rare earths to Japan served as a watershed moment, exposing the leverage that mineral chokepoints afford Beijing. Fast forward to today: the U.S. still imports over 70% of its REEs from China, and its only mine—California’s Mountain Pass—ships extracted material back to China for processing. This loop is a glaring vulnerability.
On the technology front, the study illustrates that while U.S. firms like Nvidia and Qualcomm lead in chip design, they depend on REEs like neodymium, dysprosium, terbium, and samarium for magnets, polishing, and etching. Should Beijing throttle supply—as it did with gallium and germanium in 2023—entire segments of the U.S. chip supply chain could seize up.
Limitations of the Study
While Tan et al. provide a rich comparative analysis using government records, white papers, and academic literature, the study leans heavily on secondary data and lacks original interviews or industrial case studies. It generalizes “Western inaction” without distinguishing the varied approaches of Australia, Japan, or Canada—nations that have taken meaningful steps to reduce Chinese exposure. Furthermore, the authors don’t delve into the specific cost structures or feasibility barriers impeding U.S. rare earth processing projects.
Strategic Implications
The implications are stark. China has turned rare earths into a geopolitical cudgel. And while U.S. export restrictions on semiconductors have hurt China’s chip ambitions, Beijing’s control over REE refining could deliver a retaliatory gut punch at any moment. In such a scenario, America’s chip supply chain—though advanced—is a house built on imported sand.
Tan et al. correctly note the U.S. response under both Biden and Trump administrations: invoking the Defense Production Act, classifying Australia as a “domestic source” of critical minerals, and directing funds to Mountain Pass. But the industrial base remains fragile.
A Call to Action
This study is a wake-up call for Washington and its allies. Achieving rare earth independence cannot be accomplished solely through rhetoric or tariffs. It requires a series of unfolding actions. For example, to break China’s stranglehold on the rare earth supply chain, the United States must invest aggressively in midstream infrastructure—refining and separation plants, especially for critical heavy rare earths like dysprosium and terbium.
This must be paired with deepened co-production partnerships with trusted allies such as Australia, Canada, and Japan to ensure resilient, values-aligned sourcing. At home, the U.S. must match China’s edge in green, digitized refining technologies to overcome regulatory hurdles and gain public trust. Finally, Washington must establish a national strategic reserve of rare earth elements—mirroring the Strategic Petroleum Reserve—to buffer against export shocks and geopolitical blackmail.
Above all, this research reinforces what the markets already sense: rare earths are no longer commodities. They are national security assets—and the battleground of the 21st-century tech war.
Based on “Critical Ties, Strategic Risks: The Role of Semiconductors in U.S.-China Competition, (opens in a new tab)” published in the Pakistani Journal of International Affairs, Vol. 8, Issue 1 (2025), by lead author Tan et al.
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