When you doomscroll on your phone, use the washing machine, fly in an airplane, activate the anti-lock brakes in your car, switch on the air-conditioner or watch television – you are using semiconductors. So, what the heck is a semiconductor?
It is the material used as building blocks to create the chips that act as the “brains” inside almost all of our modern devices and electronics across consumer, military, and industrial sectors. These elements can control the flow of electricity by opening to allow it to flow through (conducting), and closing to shut off the flow (insulating). Semiconductors (hence the name) sit in the middle of this spectrum, as you can see in Figure 1.[1]
Figure 1 – Typical range of conductivities for insulators, semiconductors, and conductors.
Rocks that run the world
Semiconductors rely on rare earth elements (REE) for their power and effectiveness. REEs are 17 particular elements that range from minerals to ores, and are found in Earth’s crust in various regions.[2]REEs fall into two subcategories: light (LREE) or heavy (HREE).[3]
Beyond their important work to maximize a semiconductor’s natural capabilities, the entire semiconductor ecosystem is dependent on REEs. They are used across sectors in manufacturing parts and equipment, magnets, battery alloys, glass, as catalysts, and for polishing powders used to make chips.[4]
Thulium and lutetium are the two least abundant rare earth elements.[5]Thulium is mostly found in Southern China, and it is commonly used in medical, meteorological, and military applications.[6]Lutetium, one of the most expensive metals in the world, is predominately used in oil refining, while small amounts are used for computer memory and other applications. Lutetium is found in China, United States, Brazil, India, Sri Lanka, and Australia.[7]
Even though REEs are found across the world, as of the late-1990s, China supplied 85-95% of REEs globally[8], and, as of 2022, China remains the largest producer, supplying 70% of the world’s REEs.[9]Here is a breakdown by country (Figure 2).[10]
Figure 2 – World rare earth element mine production, by country, as of 2022.
Demand trajectory
Twenty to 30 years ago, most people did not own a cellphone, personal computer, or even a camera. They certainly were not driving hybrid or electric vehicles. Thinking back even further, when baby boomers (born 1946-1964) were young, it was rare for families to even own a colour television. Today, it is common for people to install solar panels on their roofs to help power their homes, own multiple flatscreen, high-definition LED televisions with vivid colour, and have fibre-optic cables deliver internet connectivity to their many devices and gadgets. These technologies all depend on semiconductors, and by extension, rare earth elements. Since the pace of innovation is only getting faster, and given the extensive use of these materials in high-tech devices, the demand for REEs is unlikely to slow down any time soon.
Supply chain vulnerabilities
When it comes to supply, even if they wanted to, nations cannot just snap their fingers and start mining or refining rare earth metals. Extraction and refinement are very complex, difficult processes that require a lot of upfront investment, specialized expertise, and strategic planning. Plus, the elements themselves are tough to mine because they are not usually found in big enough quantities to justify the high cost of extraction.[11]
Since 2018, there have been ongoing trade disputes between the U.S. and China, and in May 2019, China alerted the U.S. that these disputes could result in them losing access to REE supplies.[12]Less than one year later, the COVID pandemic’s stay-at-home mandates created a spike in demand for digital devices, inducing a worldwide chip shortage that lasted from 2020 to 2023, disrupting the semiconductor industry and global supply chain.[13]You may recall, this shortage affected everything from cellphones to video games and new car production. As you saw in Figure 2, China is not the only source of REEs across the world. However, the high concentration of rare earth metals in China, coupled with their dominance in overall REE refinement operations,[14]contributed to the production bottleneck.
Policy responses
U.S. lawmakers are aware that their over-reliance on China for REEs is a supply chain vulnerability, given the critical importance of these elements for national security operations. In response to supply chain disruptions, to fill the gap and limit exposure, U.S. Congress enacted the CHIPS [creating helpful incentives (to) produce semiconductors] and Science Act in August 2022 to encourage domestic semiconductor production and manufacturing, through a combination of tax credits and subsidies. According to the CHIPS program office, as of 2024, it expects the U.S. to produce 20% or more of the globe’s semiconductor chips by 2030.[15]
In February 2025, the Trump administration increased tariffs on China, to which China responded by restricting the volume of REEs to the U.S.[16]An ongoing tariff war between the two countries has ensued, but, as of now, the high tariffs have been suspended until November of this year.[17]
Despite substantial investments in the sourcing and production of REEs in the U.S., China maintains a strong lead. They have the advantage of decades of government investment, the ability to control export volumes, low labour costs, and more relaxed environmental regulations.[18]China remains the sole supplier of heavy rare earth elements (HREEs),[19]and, as of 2023, 92% of the world’s most advanced manufacturing capacity of semiconductors is in disputed territory Taiwan.[20]
Due to these factors, along with their multi-decade head-start in this arena, China is expected to maintain a sizeable lead in REE production until at least 2030. A lot could change between the U.S. and China in the coming months regarding tariffs and many other factors driving the REE market.
In the meantime, the sourcing and production of rare earth elements will continue to have strategic implications across market supply chains and geopolitical relations, especially given their scarcity and necessity in military defence applications.
Citations
[1] Natural Resources Canada. (2024). Rare earth elements facts, accessed Sept 9, 2025
[2] Natural Resources Canada. (2024). Rare earth elements facts, accessed Sept 9, 2025
[3] Pecharsky, K, V., Jr., & Gschneidner, K. A. (2025, August 7). Rare-Earth Element. Uses, Properties, & Facts. Encyclopedia Britannica, accessed Sept 10, 2025
[4] Natural Resources Canada. (2024). Rare earth elements facts, accessed Sept 9, 2025
[5] King, H. M. Geology.com. REE – Rare Earth Elements and their uses, accessed Sept 9, 2025
[6] Wikipedia contributors. (2025). Thulium, accessed Sept 11, 2025
[7] Wikipedia contributors. (2025). Lutetium, accessed Sept 10, 2025
[8] Van Gosen, B. S., Verplanck, P. L., Long, K. R., Gambogi, J., & Seal, R. R. (2014). U.S. Geological Survey Mineral Resources Program. The Rare-Earth Elements: Vital to Modern Technologies and Lifestyles, accessed Sept 10, 2025
[9] Natural Resources Canada. (2024). Rare earth elements facts, accessed Sept 9, 2025
[10] Natural Resources Canada. (2024). Rare earth elements facts, accessed Sept 9, 2025
[11] King, H. M. Geology.com. REE – Rare Earth Elements and their uses, accessed Sept 9, 2025
[12] Heidi M. Peters & Marc Humphries. (2019). Congressional Research Service. Trade Dispute with China and Rare Earth Elements
[13] Wikipedia contributors. (2025). 2020–2023 global chip shortage, accessed Sept 9, 2025
[14] Zhou, W., Crochet, V., & Wang, H. (2025). Cambridge University Press. World Trade Review. Demystifying China’s Critical Minerals Strategies: Rethinking ‘De-risking’ Supply Chains, accessed Sept 10, 2025
[15] National Institute of Standards and Technology. U.S. Department of Congress. CHIPS Program Office. CHIPS for America. In The CHIPS Program Office Vision for Success: Two Years Later, accessed Sept 11, 2025
[16] The Ministry of Commerce of the People’s Republic of China. (2025). Open Government Affairs. Announce the relevant items of tungsten, tellurium, bismuth, molybdenum and indium
[17] The White House. (2025). Fact Sheet: President Donald J. Trump continues the suspension of the heightened tariffs on China, accessed Sept 12, 2025
[18] Oxford Institute for Energy Studies. (2023). China’s rare earths dominance and policy responses, accessed Sept 11, 2025
[19] United States International Trade Commission. (2023). U.S. Exposure to the Taiwanese Semiconductor Industry (USITC Publication 332-592)
[20] United States International Trade Commission. (2023). U.S. Exposure to the Taiwanese Semiconductor Industry (USITC Publication 332-592)
