The US semiconductor industry’s exposure to China is best read through the materials at the base of its supply chain rather than through its direct purchases of manufacturing equipment. China accounts for about 5 per cent of the equipment and materials supplied directly to the US chip industry when measured by country of manufacture, according to the Semiconductor Industry Association (SIA). Yet the SIA said China’s grip on certain rare earths needed for chipmaking exceeds 90 per cent.
That distinction matters because semiconductors sit across America’s economy and national security needs. They power smartphones, artificial intelligence infrastructure, medical devices, cars, manufacturing equipment and defense systems.
The industry runs on a complex global chain of equipment and materials suppliers, the SIA said. Over decades, this interconnected system has enabled US chip companies to improve performance while lowering costs. New pressures have since exposed vulnerabilities in the upstream supply chains that support the US chip ecosystem.
By the SIA’s calculation, 95 per cent of the nearly US$27 billion that American chipmakers spend each year on manufacturing equipment and materials goes to companies headquartered in the US, Europe and Japan.
The picture shifts when the same value is assessed by country of origin. The share for the US, Europe and Japan falls to 68 per cent, the SIA said. China’s portion rises to 5 per cent by production site, from about 1 per cent when measured by supplier headquarters, while Southeast Asia’s share climbs to 10 per cent from less than 1 per cent.
For a chipmaker, the immediate supplier is therefore only one part of the exposure. Access to a production input can depend on where it is made, and on the raw materials used to produce it.
The concentration is particularly stark for several minerals. China accounts for about 95 per cent of global gallium supply and 85 per cent of tungsten supply.
The SIA put China’s combined share of neodymium and praseodymium supplies at about 95 per cent. Its share of terbium is roughly 95 per cent.
Beijing has imposed export licence requirements on specified gallium products, certain tungsten products and products related to seven medium and heavy rare-earth elements.
It also announced a broader set of controls last October, then suspended them until 10 November 2026.
American companies continued to encounter shortages of critical minerals earlier this year despite the relaxation of some controls.
The SIA has urged companies and policymakers to stockpile priority inputs and build alternative supplies with allies.
That is a long-term response. The association warned that creating capacity for some materials may take a decade or more, followed by another three to four years to qualify new suppliers and materials for chip production.
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