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Semiconductor Supply Chain: Mineral Demand and Resilience Strategy

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• 6 min read
Semiconductor Supply Chain: Mineral Demand and Resilience Strategy

This article is an automatically translated version of the original Japanese article. Please refer to the Japanese version for the most accurate information.

Research Subject: Mineral Demands for Resilient Semiconductor Supply Chains (https://www.csis.org/analysis/mineral-demands-resilient-semiconductor-supply-chains)

Overview

The semiconductor industry is becoming increasingly dependent on a diverse range of critical minerals, including gallium, germanium, and rare earth elements, leading to heightened supply chain vulnerabilities. As China holds a dominant position in the mining and processing of these minerals, various countries face the risk of supply disruptions. In response, the United States and the European Union (EU) are promoting policies to strengthen the resilience of semiconductor and critical mineral supply chains through investments in domestic production, international cooperation, recycling, and technological innovation.

Key Points

1. China's Export Controls and Geopolitical Risks

Amid escalating technological competition with the United States, China has tightened export controls on critical minerals essential for semiconductor manufacturing, such as gallium, germanium, and rare metals. In December 2024, China further stricthened export controls on "dual-use" technologies, specifically targeting the United States, prohibiting shipments of antimony, gallium, and germanium to the US. Export restrictions on gallium and germanium implemented in September 2024 reduced global semiconductor supply capacity by 18-22%. China's dominance in this area could have a disproportionate impact on global technology production and defense capabilities.

2. National Policy Responses and Strengthening Domestic Production

The United States is investing $52 billion through the "CHIPS and Science Act (CHIPS Act)" to bolster its domestic semiconductor manufacturing capabilities. This act promotes investment in sustainable extraction and processing R&D for critical minerals, development of a domestic mining workforce, and the advancement of recycling and alternative technologies. The EU has also enacted the "European Chips Act" to strengthen its domestic semiconductor ecosystem, aiming to enhance supply chain resilience and reduce external dependencies. The EU has set targets to extract 10%, process 40%, and recycle 25% of its annual strategic raw material demand domestically by 2030.

3. Supply Chain Diversification and International Cooperation

Countries are emphasizing supply chain diversification and international cooperation to reduce reliance on single nations. The United States is pursuing "friend-shoring" or "ally-shoring" strategies, shifting production to allied countries that share common values. Additionally, the US-led "Mineral Security Partnership" targets strategic projects in the critical mineral value chain with 14 countries and the EU.

Background and Context

Semiconductors are the foundation of all modern technology, with demand projected to reach an annual value of $1 trillion by 2030. However, advanced semiconductors require over 300 materials, and the supply of critical minerals like gallium, germanium, and rare earth elements is deemed vulnerable due to geographical concentration in mining and processing, particularly a high dependence on China. This vulnerability has evolved into a national security concern, with governments worldwide viewing the strengthening of semiconductor supply chain resilience as an urgent task to ensure both economic competitiveness and national security.

Detailed Analysis

The semiconductor industry relies not only on silicon but also on a wider array of critical minerals. For instance, gallium, germanium, and arsenic are widely used in semiconductors that possess defense functions, such as missile defense radars, high-frequency radio, and satellite communications. Gallium, in particular, is considered to have the highest risk of supply disruption among semiconductor materials. This is largely because gallium is often produced as a byproduct of bauxite processing, and its processing capacity is limited.

Climate change also introduces new risks to supply chains. According to a PwC report, one-third (32%) of global semiconductor production could be exposed to the risk of copper supply disruptions due to climate change by 2035. Copper is an essential material for manufacturing semiconductor circuits and can be significantly affected by climate change impacts such as droughts.

The US CHIPS Act focuses not only on expanding domestic semiconductor manufacturing capacity but also on strengthening the resilience of critical mineral supply chains. Specifically, it establishes the "Critical Minerals Mining Research and Development Program" under the National Science Foundation (NSF) to invest in sustainable mineral extraction methods, recycling, and research into alternative materials. Furthermore, a "Critical Materials Subcommittee" has been established to coordinate federal government efforts regarding critical materials.

Europe's "European Chips Act" and "European Critical Raw Materials Act" set targets for the extraction, processing, and recycling of strategic raw materials within the EU, aiming to reduce dependence on any single third country to below 65%. This aims to diversify supply sources and strengthen domestic capabilities, thereby enhancing supply chain resilience.

Related Trends

In recent years, China's tightening of export controls has significantly impacted the global critical minerals market. On January 15, 2025, SEMI expressed support for a presidential proclamation by the US imposing a 25% tariff on certain advanced computing chips and initiating trade negotiations to reduce vulnerabilities in critical mineral supply chains. Furthermore, on November 13, 2025, China announced a temporary suspension of export controls on certain critical minerals and related items, based on an agreement concerning economic and trade relations with the United States, indicating a fluid situation.

Experts point out that the supply of critical minerals has emerged as a "front-line issue" amid rising geopolitical tensions. Gracelyn Baskaran, director of the CSIS Critical Minerals Security Program, states that "the biggest vulnerability is time," analyzing that even with billions of dollars invested, mining, processing, and manufacturing take years, leaving Western economies vulnerable to supply chain dominance.

Summary

  • Impact of China's Export Controls: China's export controls on critical minerals such as gallium and germanium are causing severe disruptions in the global semiconductor supply chain, highlighting the risk of supply interruptions.
  • National Policy Responses: The US CHIPS Act and the EU's European Chips Act and Critical Raw Materials Act are crucial policy instruments aimed at strengthening domestic production capacity, investing in R&D, and diversifying supply chains.
  • Supply Chain Diversification and International Cooperation: To reduce reliance on specific countries, diversification of supply sources through friend-shoring, ally-shoring, and multilateral partnerships is essential.
  • Increasing Climate Change Risks: Climate change, such as droughts, is affecting the supply of critical minerals like copper, becoming a new risk factor for semiconductor manufacturing.
  • Market and Technology Evolution: The growth of the semiconductor industry and the development of new technologies like AI are creating demand for more diverse critical minerals, making supply chain resilience indispensable for both economic competitiveness and national security.

References

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