Canada’s Push for Rare Earths in Semiconductors: Opportunities and Challenges, Need for State Support

Highlights

• Canada is developing a strategic approach to producing and processing rare earth elements for high-tech industries.
• Key target industries include semiconductors and electric vehicle technologies.
• Significant challenges include:
  • High infrastructure costs
  • Strict regulations
  • Competition from established global markets like China and the U.S.
• The national critical minerals strategy aims to:
  • Leverage domestic resources like the Nechalacho project
  • Address scalability, environmental, and technological hurdles

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Canada is exploring the potential of extracting rare earth elements (REEs) for semiconductors and EV technologies, as highlighted in the Canadian Critical Minerals Strategy Annual Report 2024 (opens in a new tab). This effort aims to establish domestic production and processing capabilities for critical minerals like germanium, gallium, and nickel, which are essential for semiconductors and batteries. The strategy prioritizes niche areas like high-purity materials and MEMS inputs while leveraging domestic resources like the Nechalacho project, which targets producing 5,000 tons of rare earth oxides annually by 2025.

While promising, there are significant hurdles. Gordon Harling (opens in a new tab), CEO of CMC Microsystems, notes the high costs, strict regulations, and long timelines for new mining projects in Canada. Additionally, refining REEs to the ultra-high purity needed for advanced semiconductors requires billions in infrastructure investment, which currently favors markets like China and the U.S. Canada’s environmental standards further complicate large-scale mining and refining. Efforts like recovering lanthanum from mine waste and refining germanium from zinc ore show potential, but these processes remain experimental and not yet scalable, reports Gary Hilson, writing for EE Times (opens in a new tab).

The article raises questions for investors in this sector:

• Scalability: Can Canada meet global demand with projects still in exploration phases?
• Competitiveness: Without significant alliances and state-backed enduring support, how will Canada compete with countries like China, which dominates processing with lower costs and infrastructure readiness?
• Market Uncertainty: What risks exist if alternative materials or technologies, like new battery chemistries, reduce the need for current REEs?
• Environmental Costs: Can Canada develop efficient and sustainable extraction and refining methods to compete globally while meeting its environmental obligations?

While the strategy positions Canada as a potential player in critical mineral markets, the high barriers to entry and competition with established global players suggest substantial risks for investors seeking near-term returns. The need for scalable technology, refining capacity, and sustainable processes remains a critical challenge.

State-sponsored enduring support is likely necessary should the nation proceed down such a pathway.