A silent war over materials is quietly reshaping the global technology landscape.
Recently, the U.S. Department of Defense has unusually invested directly in rare earth companies, and Apple has also been bolstering the domestic rare earth supply chain, drawing widespread attention from the industry. Almost simultaneously, the Chinese Ministry of Commerce implemented export controls on rare earth items used for logic chips below 14nm, marking a new phase of “technological sovereignty” in rare earth management.
Behind these events is the fierce contest between China and the U.S. in key technological fields: China is attempting to break through the bottleneck of high-end chip manufacturing, while the U.S. is striving to rebuild its rare earth industry chain. So, which country faces greater challenges? Who is more likely to win in this contest?
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01 Dependence on Rare Earths: The Multifaceted Dilemma of the U.S.
China’s dominant position in the global rare earth industry is no coincidence. Data shows that while China’s rare earth reserves account for only 36% of the global total, it contributes over 60% of global production and 90% of refining capacity. This advantage stems from decades of continuous technological accumulation and industrial integration.
The first challenge the U.S. faces in the rare earth sector is the imbalance in resource structure. The Mountain Pass mine in the U.S. is rich in light rare earths, while the elements most dependent on the Chinese supply chain are medium and heavy rare earth elements like dysprosium and terbium, which are used for high-performance neodymium-iron-boron permanent magnet materials.
China holds over 90% of the global medium and heavy rare earth reserves, making it difficult for the U.S. to escape dependence on the Chinese supply chain in the short term.
The second challenge is the technological barrier. The rare earth smelting and separation technology is a “trump card” for Chinese companies. China’s “linked extraction process” can achieve a separation purity of 99.999% for rare earth elements, far exceeding the 99.9% of similar international technologies, while reducing energy consumption by over 40%.
In contrast, while U.S. MP Materials has restarted the Mountain Pass rare earth mine, its output still needs to be sent to China for processing due to a lack of core refining technology.
The cost gap is another insurmountable chasm for the U.S. rare earth industry. Data shows that China’s rare earth processing costs are 60% lower than those in the U.S. and 80% lower than in Europe. This significant cost advantage means that even if the U.S. can establish a complete rare earth industry chain, its products will lack competitiveness in the international market.
02 The Dual Path of U.S. Rare Earth Self-Rescue
Recognizing the strategic importance of rare earths, the U.S. is accelerating the reconstruction of its domestic rare earth magnet industry chain through two paths.
One path is the “vertical integration” model represented by MP Materials. This company owns and operates the only rare earth mine in the U.S. capable of large-scale production—the Mountain Pass mine in California.
MP Materials has extended its business into magnet manufacturing, with a factory established in Fort Worth, Texas, that has begun commercial production of neodymium-praseodymium metal and has entered the trial production phase for automotive-grade sintered neodymium-iron-boron magnets.
The other path is the “latecomer expansion” route represented by USA Rare Earth (USARE). This company focuses on the “small batch high value-added” market, with its first phase project in Stillwater, Oklahoma, expected to commence commercial operations in the first half of 2026.
USARE’s customer strategy cleverly avoids direct competition with MP Materials, focusing on high value-added niche markets with stringent performance requirements, such as collaborating with Moog to provide high-temperature neodymium-boron magnets for AI data center cooling systems.
Federal and state government policy support has also provided some assistance to the U.S. rare earth industry. The Trump administration initiated a 232 investigation into critical minerals in 2025, laying a legal foundation for future tariff protection and government procurement preferences; at the same time, it utilized the Defense Production Act and Department of Energy funds to support mining, separation, and magnet projects.
03 The Three Major Challenges for China’s Chip Breakthrough
In contrast, China faces significant challenges in the high-end chip sector as well.
Photolithography technology is the biggest shortcoming in China’s chip manufacturing. Analysis from investment research firm Alpine Macro points out that China has only recently begun producing domestic deep ultraviolet (DUV) tools and is still “far from producing extreme ultraviolet (EUV) systems.” EUV lithography machines are essential for producing 7nm and more advanced chips, and this bottleneck severely limits China’s ability to produce high-end chips independently.
Even though companies like Huawei have “almost matched Nvidia” in chip design, they still “lack the capability to manufacture” a 3nm chip if they design one, creating a disconnect between design and manufacturing that poses another obstacle to the development of China’s chip industry.
The complexity of the entire semiconductor industry chain is also a severe challenge for China. The semiconductor industry can be described as “the most complex and challenging manufacturing process in history,” involving numerous aspects such as design, materials, manufacturing equipment, and packaging testing.
The U.S. has invested heavily through the CHIPS Act, announcing over 100 projects across 28 states, with total private investment exceeding $500 billion. Achieving self-sufficiency across the entire industry chain is as challenging for China as it is for the U.S. to rebuild its rare earth industry chain.
The gap in ecosystems cannot be ignored either. According to the U.S. Semiconductor Industry Association, the U.S. holds a 50.4% share of the global chip market and has a complete supply chain for chip design, manufacturing, equipment, and materials.
In 2024, the total R&D investment in the U.S. semiconductor industry is expected to reach $62.7 billion, accounting for 17.7% of sales, further solidifying the U.S.’s technological leadership.
04 The Contest Pattern and Future Direction
The technological contest between China and the U.S. has formed a mutually dependent pattern of “Chinese rare earths – American chips.” China provides the key rare earth materials needed for the semiconductor industry, while the U.S. supplies high-end chip design and manufacturing equipment. This division of labor has supported the rapid development of the global technology industry over the past two decades.
This interdependence is evolving into a strategic contest: the U.S. restricts chip technology exports to China through the “Entity List,” while China retaliates with rare earth controls, creating a situation of “technology blockade vs. resource control.”
Some analysts suggest that the Trump administration may seek to reach an agreement with China for “rare earths in exchange for silicon,” reflecting the complementarity and interdependence of both sides in terms of resources and technology.
From a temporal perspective, China’s pace in narrowing the chip gap may be faster than many expect. Noah Ramos, a strategist at Alpine Macro, notes that while he would be surprised if the U.S. leading advantage is completely eroded before the end of this decade, China’s quantity-driven strategy may significantly reduce the performance gap.
He points out that Huawei has achieved a level of computational output comparable to Nvidia by deploying about five times the number of Ascend chips, making this “quantity over quality” strategy an important avenue for China to catch up.
In the rare earth sector, however, the U.S. self-rescue efforts may take longer. The U.S. only has mining and limited refining capabilities, and establishing a complete industry chain from mining to magnets and reducing costs is not something that can be accomplished overnight.
05 Winning Moves and Future Impacts
From multiple dimensions, it is indeed more difficult for the U.S. to break through the rare earth challenges than for China to overcome the chip challenges.
The essence of the technology is different. The rare earth industry chain involves multiple stages such as mining, separation, metal smelting, and magnet manufacturing, and China has formed a complete industry chain after decades of accumulation. In contrast, while chip manufacturing is extremely complex, China has already made breakthroughs in various aspects such as design, equipment, and materials, and technological progress is rapid under the support of a national system.
The potential for substitution differs significantly. Substituting rare earths is more challenging, especially for high-performance neodymium-iron-boron magnets in defense and aerospace fields, where there are almost no mature alternatives. In the chip sector, however, China is compensating for the shortcomings of individual chips through system-level innovations, such as deploying more chips and optimizing software to enhance overall computing power.
The time window is not the same. China’s chip industry is developing at an astonishing speed driven by policies, markets, and funding; meanwhile, the U.S. rare earth industry chain reconstruction is progressing slowly, with MP Materials’ magnet factory expected to gradually increase production by the end of 2025, and USARE not expected to start production until 2026, with limited initial capacity.
The outcome of this contest will reshape the global technology industry chain landscape. In the short term, the two countries may reach some form of “rare earth-chip” transaction; in the medium to long term, the global technology industry chain may undergo regional reorganization, forming a multipolar pattern of “Chinese resources + technology – American high-end technology – manufacturing in other regions.”
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The future competitive landscape may no longer be dominated by one entity but rather a diversified and regionalized supply chain network. The global technology industry is transitioning from globalized division of labor to regional reorganization, forming a multipolar pattern of “Chinese resources + technology – American high-end technology – manufacturing in other regions.” In this reshaping, the security and efficiency of supply chains will become a common pursuit for all countries.
In this war without gunpowder, the speed of innovation and the ability to integrate the industry chain will ultimately determine who the winner is. The result is likely not a zero-sum game but a joint push for technological progress and a reconfiguration of the global industry chain.