Taiwan chip sector urged to reduce reliance on China's rare earths

Dec. 4, Taipei (CNA) Taiwan should reduce its reliance on China for rare earth supplies to safeguard its semiconductor industry, the Australian New Zealand Chamber of Commerce in Taiwan (ANZCham Taiwan) said Wednesday, suggesting Australia as an alternative.

In its 2025 White Paper, the chamber said Taiwan's chip sector is vulnerable because more than 95 percent of its rare earth imports come from China.

Taiwan imports around 3,000 tons of rare earth elements annually for manufacturing purposes while producing no rare earth raw materials domestically, and only one or two domestic companies are involved in refining or processing the elements, the report said.

"In short, Taiwan's critical mineral imports are highly concentrated in one supply chain, creating a potential single point of failure," the report read.

Citing China's 2023 export controls on gallium that triggered a 27 percent surge in global prices for the critical material for advanced chips, ANZCham Taiwan suggested that Taiwan diversify its supply sources to strengthen industrial resilience.

The chamber recommended building a strategic partnership with Australia, home to the world's largest lithium mine and the country with the largest share of rare earth mining outside China.

It proposed an alternative trilateral framework that also involved Japan, given its advanced processing capabilities and long-standing status as one of Australia's major minerals investors and customers.

Whether that advice is feasible remains debatable, however, as other countries such as the United States have struggled to stem their reliance on Chinese rare earths and are aggressively seeking alternatives.

A New York Times report said it would take Washington years to really replace China's supplies, in part because of how far behind it and other countries are in building refining capacity.

China dominates the sector so thoroughly because of its willingness to tolerate a refining process that is energy consuming and environmentally unfriendly, said Chung-hua Institution for Economic Research President Lien Hsien-ming (連賢明) in early November.

"Many countries with the mines are thus reluctant to build their rare earth industry. Meanwhile, China has managed to destroy its competitors when seeing other countries try to run their own businesses," he said.

In a statement responding to China's stricter rare earth controls imposed on Oct. 9, Taiwan's Ministry of Economic Affairs said the rare earths involved in the controls were different from those used in chip manufacturing, but it pledged to still keep tabs on the matter.

The issue is critical to Taiwan because of how important electronic components, led by semiconductors, are to the country's economy, accounting for US$177.2 billion in exports in 2024, or 37.3 percent of Taiwan's total exports, Ministry of Finance data showed.

The issue extends beyond semiconductors, the ANZCham paper said, because renewable energy technologies -- including solar panels and wind turbines, the two leading contributors to Taiwan's renewable energy mix -- also rely on rare earth magnets.