China's Expanding Export Controls for Rare Earth Materials

China’s recent export controls on key materials such as graphite, germanium, and antimony are raising alarms across the U.S. semiconductor industry. According to a report by TECHCET, these restrictions, particularly on materials vital for semiconductor manufacturing and defense applications, will significantly impact the U.S. supply chain. With over 90% of the world’s graphite processing and more than 50% of germanium production controlled by China, U.S. manufacturers could face critical shortages in the coming years.

The latest restriction on antimony, a crucial material for both commercial and military applications, adds to the growing list of export-controlled materials. China, which processes nearly 80% of the world's antimony, recently implemented export licensing requirements, forcing companies to identify the end-user and the end-use of the material.

These export controls come as the U.S. semiconductor industry is experiencing a rapid rise in demand, with wafer production projected to grow by 5% annually from 2023 to 2028. The new restrictions could create bottlenecks in the production process, leading to higher costs and delays in semiconductor manufacturing. The U.S. will now have to secure alternative sources, a challenge given the limited global availability of these materials.

Furthermore, the upcoming U.S. election may intensify trade tensions between the two nations. As Nikkei Asia recently analyzed, the election could lead to stricter sanctions on China, complicating an already strained trade relationship. This adds another layer of uncertainty for U.S. manufacturers relying on Chinese exports.

To mitigate the risks posed by these restrictions, U.S. companies are exploring alternative sources of critical materials. However, with China dominating the global supply of graphite, germanium, and antimony, finding viable alternatives will require substantial investment and time. In the interim, industries relying on these materials, especially semiconductors and defense, may face significant disruptions.

The U.S. government is expected to respond by strengthening domestic mining initiatives and forming new international partnerships to reduce its dependence on Chinese imports. However, until these solutions are in place, the semiconductor and defense industries will remain vulnerable to further export controls.