The United States faces significant vulnerabilities in its semiconductor and high-tech industries due to heavy reliance on foreign sources of rare earth elements (REEs) and critical metals. China, which controls approximately 80% of global rare earth processing capacity, has further underscored this dependency through its recent export restrictions. In 2023, China imposed stringent limits on the export of gallium and germanium, two critical materials used in semiconductors and defense applications, as part of its response to escalating geopolitical tensions. According to the U.S. Geological Survey, these restrictions have the potential to disrupt over $500 billion worth of industries reliant on these materials, highlighting the fragility of U.S. supply chains.
Compounding this issue are domestic challenges, including stringent Environmental Protection Agency (EPA) regulations and limited refining infrastructure, which have hampered efforts to expand domestic rare earth mining and processing. The United States currently imports over 78% of its rare earth elements from China, underscoring a critical vulnerability in its supply chain. The Mountain Pass mine in California, the nation’s only active rare earth mining operation, sends its raw materials to China for processing, further entrenching U.S. dependence.
This report outlines a comprehensive set of recommendations to address these challenges and establish a robust domestic supply chain for rare earths and critical metals. These policies aim to strengthen economic resilience, safeguard national security, and ensure the United States maintains its leadership in the global semiconductor and high-tech industries. Current Landscape and Challenges
The U.S. is heavily reliant on imports for its supply of rare earth elements (REEs) and processed materials, with China dominating the global market. As of 2022, over 60% of the world’s rare earth oxides were produced in China, which also accounts for an even larger share of refining capacity. The United States imported approximately 78% of its REEs from China, a dependency that leaves critical industries—including semiconductors, defense, and renewable energy—vulnerable to supply chain disruptions.
China's strategic control over rare earths has been underscored by recent export restrictions on gallium and germanium, materials essential for semiconductor production. These restrictions are part of an escalating geopolitical competition, particularly in technology and defense. According to the U.S. Geological Survey, these constraints could disrupt over $500 billion worth of industries reliant on these materials, amplifying the urgency for domestic solutions.
Regulatory and Investment Challenges
Domestic rare earth production and processing are constrained by stringent regulatory frameworks and insufficient investment. The Environmental Protection Agency (EPA) imposes rigorous environmental standards on mining operations and waste management to mitigate potential hazards such as radioactive byproducts. These regulations, while essential for safeguarding public health and the environment, significantly increase project costs and timelines. For instance, obtaining permits for a rare earth mining operation in the U.S. can take up to a decade, compared to a fraction of that time in China.
Additionally, there is a lack of direct federal support for refining infrastructure, which has deterred private sector investment. The Mountain Pass mine in California, the only active rare earth mining operation in the U.S., exemplifies these challenges. While the mine extracts raw materials, they must be shipped to China for processing due to the absence of domestic refining capabilities. This dependency highlights the gap in the U.S. supply chain, leaving it vulnerable to geopolitical leverage by China.
U.S. Players in the Industry
Several U.S.-based companies are attempting to address these vulnerabilities by investing in domestic mining, processing, and recycling capabilities:
MP Materials: Operates the Mountain Pass mine and is developing plans for a domestic refining facility, supported by grants from the Department of Defense.
Energy Fuels Inc.: Focuses on extracting rare earth elements from existing mining operations and has initiated pilot programs for processing REEs.
Texas Mineral Resources Corp.: Engaged in projects to extract and refine rare earth elements from deposits in Texas.
Lynas Rare Earths (U.S. Division): An Australian company partnering with the U.S. government to establish refining operations in Texas.
Despite these efforts, the scale of domestic production and refining remains far below demand, leaving the U.S. reliant on imports for over 80% of its needs.
Environmental and Technological Hurdles
EPA regulations, particularly concerning waste management, limit the development of large-scale rare earth refining operations. Rare earth mining often generates radioactive byproducts, which require specialized handling and disposal to avoid contamination. The permitting process for mining operations also involves extensive environmental impact assessments, adding time and complexity to project approvals. Furthermore, rare earth processing is an energy-intensive and technically challenging endeavor, requiring advanced chemical separation techniques. The U.S. lacks the industrial base and expertise to compete with China’s decades-long investment in refining technologies, further exacerbating the supply chain bottleneck.
Strategic Implications
Without immediate and coordinated policy interventions, the U.S. risks falling further behind in the global race for critical materials. The lack of domestic refining infrastructure undermines efforts to build resilient supply chains for semiconductors, defense systems, and renewable energy technologies. Coupled with restrictive regulations and limited federal support, these challenges jeopardize the U.S.’s ability to maintain technological leadership and economic security in a rapidly shifting geopolitical landscape.
Recommendations
Addressing the challenges in securing rare earth elements (REEs) and critical metals for U.S. industries requires a multifaceted approach that prioritizes national security, economic resilience, and environmental stewardship. The following policy measures are designed to mitigate risks, bolster domestic capabilities, and reduce dependency on foreign suppliers, particularly China.
Establishing a national strategic reserve of critical materials is essential for insulating the U.S. from supply chain disruptions. The current National Defense Stockpile program, valued at $1.2 billion, is insufficient to meet the increasing demands of industries such as semiconductors, defense, and renewable energy. This program should be expanded significantly, with an additional $10 billion allocated to stockpile critical materials, including gallium, germanium, neodymium, and dysprosium. This reserve should be designed to meet projected industry needs through 2035 and managed in coordination with private sector stakeholders to ensure timely deployment during crises.
Private sector investment in mining and refining capabilities must be incentivized through a combination of tax credits, grants, and low-interest loans. A dedicated $2 billion investment fund, modeled on the success of the CHIPS Act, should be created to support projects focused on rare earth separation and refining plants. The Department of Energy (DOE) should allocate a portion of this funding to restarting domestic production of rare earth magnets, a critical component in defense systems and electric vehicles. Providing financial support for research into environmentally sustainable extraction and refining technologies will also attract private investments while addressing environmental concerns.
Regulatory delays have long been a bottleneck for domestic mining and processing projects. While environmental protections are non-negotiable, streamlining the permitting process is imperative to accelerate project timelines. A federal task force should be established to coordinate with state governments, ensuring a unified and efficient approach to permitting. A maximum timeline of 18 months for project approvals should be implemented, supported by clear guidelines that balance economic priorities with environmental safeguards. This framework should include expedited processes for projects involving critical materials identified as essential to national security.
Investing in recycling technologies offers a sustainable solution to reduce reliance on raw material imports. Currently, less than 10% of rare earth materials in electronic waste are recycled in the U.S., leaving significant potential untapped. A federal program offering $500 million in grants to develop advanced recycling technologies could increase the recycling rate to 40% by 2030. Partnering with private companies to scale urban mining operations will enable the recovery of valuable materials from discarded electronics, reducing the environmental impact of mining while diversifying supply sources.
Diversifying supply chains through strategic partnerships with allied nations is critical to mitigating geopolitical risks. Countries like Australia and Canada possess abundant rare earth reserves and have expressed willingness to collaborate with the U.S. Joint ventures in extraction and processing facilities, supported by targeted investments, will ensure stable material flows. For example, the Lynas Rare Earths processing facility in Texas, which received $120 million in funding from the Department of Defense, serves as a model for future collaborations. Expanding this approach with $5 billion in allied investments will reduce dependency on Chinese refining capabilities while strengthening economic ties with partner nations.
Technological innovation and material substitution are long-term strategies to decrease reliance on traditional rare earths. Federal funding for research and development should be significantly increased, with programs like ARPA-E (Advanced Research Projects Agency–Energy) receiving an additional $1 billion annually. This funding should focus on developing alternatives to rare earths in semiconductors, defense applications, and renewable energy technologies. Investment in advanced manufacturing techniques, such as additive manufacturing and new chemical processes, will further reduce material demand and enhance U.S. technological leadership.
By implementing these measures, the U.S. can build a resilient and self-reliant rare earth supply chain. These initiatives will not only protect critical industries from geopolitical risks but also stimulate domestic economic growth and technological innovation, ensuring the nation's competitive edge in the global economy.
Conclusion
To safeguard national security, economic stability, and technological leadership, the United States must urgently address its dependence on foreign sources of rare earth elements (REEs) and critical metals. The current vulnerabilities in supply chains, exacerbated by geopolitical tensions and restrictive domestic regulations, highlight the need for immediate and coordinated action. By implementing the proposed policies, the U.S. can establish a resilient and self-reliant ecosystem for critical materials.
Creating strategic reserves, incentivizing domestic production, streamlining regulatory frameworks, and investing in recycling and innovative material substitutes will strengthen supply chains while reducing reliance on foreign sources. In addition, fostering partnerships with allied nations and supporting advanced technological development will ensure access to vital resources and enhance the country’s industrial and technological competitiveness.
These measures will not only mitigate risks to key sectors such as semiconductors, defense, and renewable energy but also promote long-term economic growth and environmental sustainability. Addressing these challenges effectively will position the United States to maintain its leadership in critical industries and secure a stable and prosperous future in the global economy.
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