Critical Minerals and Semiconductors: The Supply Chains Behind Modern Tech

Why a few minerals and a few factories decide so much

Electric vehicles, wind turbines, smartphones, fighter jets and artificial intelligence data centres all depend on two things that few countries control: processed critical minerals and advanced semiconductors. Both supply chains are long, specialised and concentrated, which makes them efficient in calm periods and fragile when politics intervenes. This guide follows each chain from raw material to finished product, shows where the bottlenecks sit and explains what governments and companies are doing about them.

Critical minerals: mining is only the first step

The most important point for investors is that mining and processing are different businesses in different places. A country can dig up an ore and still depend on another country to turn it into a usable material.

Material	Used for	Where the concentration is
Rare earths (such as neodymium, praseodymium, dysprosium, terbium)	Powerful permanent magnets in EV motors, wind turbines, electronics and defence systems	China dominates processing and magnet manufacturing, with a smaller but still large share of mining; Australia (Lynas) and the US (MP Materials) are the main producers outside China
Lithium	EV and storage batteries	Mined mainly in Australia, Chile, Argentina and China; refining is concentrated in China
Cobalt	Battery cathodes, alloys	The Democratic Republic of Congo supplies roughly two-thirds or more of mined cobalt; refining is concentrated in China
Nickel	Batteries, stainless steel	Indonesia has become the largest producer
Gallium and germanium	Semiconductors, fibre optics, infrared and military optics	China produces the large majority of the world's supply
Graphite	Battery anodes	China dominates both mining and anode processing

These figures are broad estimates from agencies such as the International Energy Agency and the US Geological Survey, and they change from year to year. The pattern, however, is stable: the stage that has the fewest alternatives is usually refining, not digging.

Semiconductors: a chain with several single points of failure

A chip passes through many companies in many countries before it reaches a device:

1. Design, led by companies in the United States, with major players in the UK, Taiwan and elsewhere.
2. Equipment. The most advanced chips need extreme ultraviolet lithography machines, which only ASML in the Netherlands makes. Other critical tools come from the US (Applied Materials, Lam Research, KLA) and Japan (Tokyo Electron).
3. Materials. Specialised chemicals, photoresists and high-purity gases, with Japan prominent, plus minerals such as gallium and germanium.
4. Manufacturing. The most advanced chips are made mainly by TSMC in Taiwan, with Samsung in South Korea the other leading-edge producer.
5. Assembly, packaging and testing. Concentrated in Taiwan, Malaysia, China and elsewhere in Asia.

The 2022 war in Ukraine showed how a small input can matter: Ukraine had been a significant supplier of the neon gas used in chip lithography, and manufacturers had to find other sources. The larger exposure is geographic. Taiwan's role in advanced manufacturing makes any disruption to the island a risk for the whole electronics industry.

How governments have responded

• Export controls. China introduced licensing for gallium and germanium exports in 2023, for graphite in late 2023, for antimony in 2024 and for several medium and heavy rare earths in April 2025. The United States has restricted exports of advanced chips and chipmaking equipment to China since October 2022.
• Subsidies for chip factories. The US CHIPS and Science Act (2022) provides about 52 billion dollars for manufacturing and research. The EU's Chips Act (2023) aims to double Europe's share of global production to 20 percent by 2030. Japan, South Korea and India have launched their own incentives.
• Raw materials policy. The EU Critical Raw Materials Act (2024) sets 2030 benchmarks, including that no single country should supply more than 65 percent of any strategic raw material the EU uses. The Minerals Security Partnership, launched in 2022, brings together governments to support projects that diversify supply.
• Stockpiling and recycling. Several countries are building strategic reserves, and recycling of magnets and batteries is expanding, though it covers only a small share of demand today.

Why diversifying is slow

Building a new mine, refinery or chip factory takes many years. The International Energy Agency has found that bringing a new mine into production typically takes well over a decade from discovery. Processing plants face permitting, financing and environmental hurdles, and Chinese producers have had decades of experience and scale that lower their costs. Prices for these materials are also volatile, which makes it hard for new projects outside China to secure financing without guarantees such as long-term purchase contracts or government support.

What investors and companies should watch

1. The bottleneck, not the headline. Ask where in the chain the fewest suppliers exist. That is where prices and policy risk concentrate.
2. Offtake agreements. Long-term contracts with automakers or governments are often what makes a mining or processing project financeable.
3. Policy announcements. Export licence rules and subsidy decisions can change the economics within weeks.
4. Substitution and efficiency. Engineers are reducing or replacing rare earths in some motors and developing battery chemistries that use less cobalt or no nickel. Demand forecasts depend on these choices.
5. Company concentration. Check how much of a company's revenue depends on a single customer, plant or country.

For regional examples, see our articles on lithium infrastructure in Latin America and on gold and critical minerals during conflict, and our guide to global trade corridors.

Frequently asked questions

Why do rare earths matter if they are not actually rare?

They occur in many places in the earth's crust, but economically workable deposits and, above all, the processing capacity to separate and refine them are concentrated in a few countries.

Can the United States or Europe replace China's role soon?

Not quickly. New capacity is being built, but meaningful diversification in processing takes years, and costs remain a challenge.

Is the semiconductor shortage over?

The acute shortages of 2021 and 2022 eased, but advanced manufacturing remains highly concentrated, and demand from artificial intelligence keeps pressure on the most advanced chips and on packaging capacity.

Sources and further reading

• International Energy Agency, Global Critical Minerals Outlook (annual), on iea.org.
• US Geological Survey, Mineral Commodity Summaries (annual), on usgs.gov.
• European Commission, Critical Raw Materials Act, on commission.europa.eu.
• US Department of Commerce, CHIPS for America programme, on commerce.gov, and Bureau of Industry and Security export control rules, on bis.doc.gov.
• Chris Miller, Chip War (2022).

Market shares, rules and prices change quickly; check the sources above for the latest figures. This article is general information, not investment advice.