CSIS Report Warns of Critical Mineral Supply Chain Risks Impacting Semiconductor Production

The Center for Strategic & International Studies has released a comprehensive report underscoring the severe vulnerabilities within the global semiconductor supply chains, heavily dependent on four critical minerals: gallium, germanium, palladium, and silicon. As the semiconductor industry underpins a wide array of modern technological advancements—from artificial intelligence and 5G communications to renewable energy infrastructure—any disruption in the steady supply of these minerals could have sweeping repercussions, impacting innovation and national security.

Recent Events Magnifying Supply Chain Concerns

1. China's Expanding Export Controls for Rare Earth Materials

China's recent move to impose export controls on antimony, which took effect on September 15, 2024, has intensified global concerns about mineral supply security. Antimony is a crucial material used in the production of flame retardants, solar panels, and critical military applications. With China responsible for 48% of the global antimony production in 2023, the new restrictions are projected to tighten supply, drive up global prices, and create ripple effects across industries dependent on this mineral.

This export control is part of a larger strategy employed by Beijing, following previous restrictions on other strategic minerals, including rare earth magnets, graphite, gallium, and germanium. The United States, which imported 63% of its antimony from China in 2023, faces a significant challenge in diversifying its sources and securing its supply chain against future disruptions.

2. Hurricane Helene's Impact on Quartz Mining in North Carolina

In a separate but equally concerning development, Hurricane Helene has inflicted extensive damage in North Carolina, leading to the temporary shutdown of a crucial high-purity quartz mine in Spruce Pine. This mine is globally renowned for supplying some of the purest natural quartz, which is essential for manufacturing silicon wafers. Silicon wafers serve as the foundational material for semiconductors, which are integral to everything from smartphones to data centers. The mine’s closure has sent shockwaves through the global semiconductor industry, as the unique purity of Spruce Pine quartz is irreplaceable, and alternative sources are limited. Although semiconductor manufacturers may have short-term reserves, a prolonged shutdown could exacerbate supply constraints and lead to price hikes in both the semiconductor and solar industries.

The Spruce Pine area also contributes to the production of materials like feldspar and mica. However, it is the high-purity quartz that remains critical for tech applications, underscoring the fragility of these mineral supply chains and the potential for natural disasters to cause significant disruptions.

3. $1.7 Billion Takeover Battle Over Korea Zinc

Adding to these concerns, a high-stakes corporate battle is unfolding over Korea Zinc, the world’s largest zinc smelter. The Wall Street Journal reports that this conflict is driven by fears that control over the company could shift toward Chinese interests, threatening the security of proprietary technologies essential for building a China-independent supply chain. Korea Zinc is a vital player in the production of materials used in semiconductors and electric vehicle batteries. The takeover attempt by private equity firm MBK Partners, backed by influential stakeholders, has raised alarms over the possibility of sensitive technologies and industrial capabilities being compromised. Despite assurances from MBK that there are no plans to sell the company to China, Korea Zinc and its allies argue that any shift in ownership could jeopardize the company’s strategic assets, posing risks to the broader supply chain and industrial competitiveness. With global supply chains already under stress, the outcome of this takeover battle could have far-reaching implications, especially for countries seeking to minimize their reliance on Chinese resources.

Strategic Recommendations and Call to Action

The CSIS report underscores the urgent need for the United States and its allies to implement robust measures to secure and diversify supply chains for these critical minerals. The recommendations include:

• Increasing Domestic Mining and Refining Capabilities: To reduce dependency on foreign suppliers, particularly from China and Russia.
• Forging Alliances with Mineral-Rich Nations: Collaborating with countries that possess untapped mineral resources to create more resilient supply chains.
• Investing in Recycling and Alternative Materials: To ensure a sustainable and secure supply of minerals necessary for advanced technologies.
• Strategic Stockpiling: Establishing reserves for critical minerals to buffer against sudden supply shocks.
  
  

As the semiconductor industry grapples with these compounded challenges, the report serves as a wake-up call for both policymakers and industry leaders. Ensuring the steady and secure supply of critical minerals is not just about maintaining economic competitiveness but also about safeguarding national security and technological progress.