Mineral Monopoly

Decades of sweeping industrial policies have afforded Beijing a near-total monopoly over gallium, a critical mineral used to produce high-performance microchips that power some of Washington’s most advanced military technologies. Failing to address glaring vulnerabilities in the gallium supply chain could pose serious national security and economic challenges for the U.S. and its allies.

China produces a staggering 98 percent of the world’s supply of raw gallium.

▲ Gallium is primarily extracted from smelting bauxite into aluminum, through which trace amounts of gallium can be recovered.

▲ While bauxite is abundant, its mining is heavily concentrated in a handful of countries, and Chinese companies are responsible for nearly all gallium extracted from bauxite.

▲ The United States and other advanced economies purchase gallium from China and refine it further for use in commercial and military applications.

▲ Gallium-based semiconductors are vital to the U.S. defense industry, particularly in next-generation missile defense and radar systems, as well as electronic warfare and communications equipment.

▲ China’s stranglehold on the supply of raw gallium is a critical vulnerability for the United States and its partners — one that Beijing is poised to exploit if Washington does not take steps to limit its exposure.

Gallium’s Revolutionary Properties

The unique chemical and physical properties of gallium make it well suited for use in high-performance applications, such as advanced military equipment. When combined with other materials, gallium is used to produce a special class of chips, known as “wide bandgap” semiconductors.

These chips can handle higher temperatures, voltages, and frequencies than conventional silicon chips, enabling them to be faster and more efficient.

Gallium chips have long powered advances in military technology. In the 1970s, the U.S. Defense Advanced Research Projects Agency (DARPA) incubated a new generation of semiconductors made from gallium arsenide (GaAs). These semiconductors helped to power advances in the U.S. Global Positioning System, precision-guided weapons, and radar, and GaAs remains widely used in many modern electronics, including smartphones.

▲ Artist’s rendering of GaN wurtzite crystal.

Now, the development of a more advanced compound called gallium nitride (GaN) — also nurtured by DARPA — is powering new technological breakthroughs. GaN is revolutionizing modern radar, allowing new radar modules to track smaller, faster, and more numerous threats from nearly double the distance. Many of these cutting-edge radar systems are powered by several thousand gallium-enabled chips.

U.S. and allied armed forces are swiftly incorporating GaN-enhanced radars into critical platforms, including F-35 stealth aircraft, missile defense systems such as the Patriot and Terminal High Altitude Area Defense systems, and dozens of advanced naval warships. These upgrades are poised to bring about a sea change in the ability of U.S. and allied forces to defend against emerging threats like hypersonic missiles and next-generation stealth aircraft.

Gallium-based chips are also increasingly vital to the commercial sector. Their efficiency and durability make them well suited for the harsh conditions of 5G base towers, as well as key green technologies like solar cells and electric vehicles.

Major Applications of Gallium

▲ Radio Frequency (RF). Chips made with gallium are used as power amplifiers to boost the signal power of high-frequency transmitters and receivers. Uses: Phased-array radars; electronic warfare systems; satellite communications systems; 5G wireless base stations; mobile phones.

▲ Optoelectronics. Due to their direct bandgap, gallium-based chips can efficiently convert electricity to visible light. Uses: LED lighting; LIDAR; infrared/ultraviolet lasers.

▲ Power Electronics. Power electronics, which regulate the flow of electricity into devices, use the power density and efficiency of gallium-based chips to deliver electricity. Uses: Spacecraft power management; fast chargers (electric vehicles and consumer electronics); data centers; power grid management.

▲ Clean Energy. When applied directly in thin layers, gallium can improve the efficiency of important clean energy technologies. Uses: Solar cells; Neodymium-iron-boron (NdFeB) magnets for electric vehicles.

The importance of gallium is expected to grow. As continued advances in chipmaking push the limits of Moore’s Law, industry experts see gallium-based chips as a potential way to move beyond silicon. These trends are expected to drive 25 percent annual growth in the global market for GaN chips through 2030.

Defense applications are expected to account for roughly half of this increase, underscoring gallium’s strategic value to U.S. and allied military modernization efforts. A top executive at Raytheon, a leading producer of GaN radar systems, noted in 2023 that “GaN is foundational to nearly all the cutting-edge defense technology that we produce.”

GaN is foundational to nearly all the cutting-edge defense technology that we produce.

- Colin Whelan, President of Advanced Technology at Raytheon Missiles & Defense

The increasing demand for gallium in critical industries has raised the stakes for securing a steady supply of the mineral. A sudden gallium supply shock would have consequences for defense manufacturers and broader economic security.

A 2022 analysis by experts from the U.S. Geological Survey (USGS) found that a 30 percent supply disruption of gallium could have cascading effects that cause a roughly $600 billion decline in U.S. economic output, or 2.1 percent of GDP.

Although defense manufacturers account for only a small portion of the global end use of gallium, shortages and disruptions in the supply of semiconductors and other key electronics can pose long-term challenges for defense firms. Many of the U.S. military’s major suppliers of GaN chips also rely on revenue from substantial sales to civilian customers. Interruptions to their commercial operations may complicate their ability to meet the growing needs of the defense industry for gallium-based systems.

Both Washington and its allies have been aware of these risks for years. The USGS has included gallium on each iteration of its critical minerals list since 2018, and its most recent review of critical minerals ranked gallium number one (out of fifty) in terms of supply risks. The European Union and Japan have likewise identified gallium as a strategic raw material important for national security.

▲ Critical Minerals Commodity Supply Risk Assessment. Source: U.S. Geological Survey (USGS) report “Methodology and Technical Input for the 2021 Review and Revision of the U.S. Critical Minerals List.” The disruption potential (horizontal axis), economic vulnerability (vertical axis), and trade exposure (point size), are the inputs used by USGS to calculate the overall supply risk.

Heightened U.S.-China tensions have further upped the ante. In 2020, the Trump administration declared U.S. critical mineral dependencies a national emergency, and the Biden administration’s 2021 100-day supply chain review warned that U.S. reliance on China for gallium risks disruptions that would have “far-reaching impacts on semiconductor production.”

Yet government policies on critical minerals in the United States and abroad have been heavily biased toward securing access to a select group of inputs needed for emerging green technologies, such as lithium and cobalt. The lack of similar attention paid to lesser-known minerals like gallium has left government and industry leaders unprepared for the consequences of possible disruptions.

▲ Average Commodity Price of Gallium. Source: U.S. Geological Survey (USGS).

The Chinese government put this vulnerability on display in early July 2023 when it announced a slate of export restrictions on gallium metal and key gallium compounds (including GaN and GaAs) in response to recently implemented export controls on advanced chips and chipmaking equipment put in place by the United States, Japan, and the Netherlands. Within the first week of the announcement, gallium prices jumped 27 percent as global traders rushed to secure their supply.

How exactly China will apply the new restrictions is still unclear. The move served as a shot across the bow that demonstrates Beijing’s willingness to leverage its control over critical minerals as a tool in its intensifying technological competition with the United States.

China’s Path to Gallium Dominance

China’s control over gallium supply chains came about indirectly. Gallium is largely derived as a byproduct of processing bauxite, the primary ore for aluminum. Its production is therefore closely tied to the dynamics of global aluminum markets.

The country’s emergence as an industrial powerhouse has driven explosive growth in its aluminum industry. Assisted by extensive government subsidies and tax incentives, China experienced a tenfold increase in aluminum production (from 4.2 to 40.2 million tons) between 2000 and 2022. Today, China supplies approximately 59 percent of the world’s aluminum.

▲ A bauxite offloading site in Yantai, Shandong Province of China.

This leading position has allowed China to establish a dominant share of global gallium production. Deliberate government policies also played a role, with Beijing requiring its booming aluminum producers to install the capacity to extract gallium. From 2005 to 2015 alone, China’s production of low-purity gallium exploded from 22 metric tons to 444 metric tons.

China’s rapid rise in the industry created oversupply in the global market, triggering severe fluctuations in gallium prices throughout much of the 2010s. Leading suppliers in the United Kingdom, Germany, Hungary, and Kazakhstan suffered as a result and were forced to shutter their production, leaving China as virtually the only supplier in the world.

▲ Global Aluminum Production. Source: International Aluminium Institute.

▲ Global Primary Gallium Production. Source: U.S. Geological Survey (USGS).

Climbing the Value Chain

While holding sway over raw gallium production affords China leverage over its competitors, the country’s leaders understand that long-term advantage is won at the cutting edge of innovation. To achieve this, Beijing is actively supporting its firms in overtaking the United States and its allies to become global leaders in gallium-based semiconductor production.

The 14th Five Year Plan, China’s top national economic blueprint released in 2021, identifies wide bandgap semiconductors — namely GaN and another compound called silicon carbide — as a key focus area.

Making headway in the development of gallium-based semiconductors could offer China unique opportunities to advance its drive for technological self-sufficiency. Compared to silicon-based chips, which have existed for more than half a century, GaN semiconductors are still maturing, and new markets are emerging.

As the semiconductor industry shifts from silicon to gallium, China is preparing to take the lead position.

- Hao Xiaopeng, State Key Lab of Crystal Materials

If China can make breakthroughs in the initial phases of GaN semiconductor development, it can potentially lock in early-mover advantages in ways similar to its success at capturing the lead in producing advanced batteries for electric vehicles.

Chinese experts specializing in third-generation semiconductors have signaled that Beijing’s efforts to develop gallium chips are aimed at technologically leapfrogging the United States, Europe, and Japan. A prominent researcher at a Chinese state key laboratory asserted that “as the semiconductor industry shifts from silicon to gallium, China is preparing to take the lead position.”

The scale of Chinese efforts to acquire foreign gallium-based semiconductor technology lays bare its ambitions. Over the past decade, Chinese individuals, firms, and entities have been engaged in a systematic campaign of corporate espionage and strategic acquisitions to target GaAs and GaN technologies from companies in the United States and other advanced economies.

China’s Efforts to Target Foreign Gallium Technologies

Year: 2010

Description: A federal jury in Massachusetts convicts two Chinese nationals of unlawfully exporting export-controlled electronics components containing GaAs technology to military entities in China.

Year: 2015

Description: The Committee on Foreign Investment in the U.S. (CFIUS) blocks a $2.9 billion bid by Chinese investors for the LED-component subsidiary of Philips, a major Dutch lighting firm. CFIUS cited concerns that China sought the firm’s GaN technology for military purposes.

Year: 2015

Description: Taiwan’s Ministry of Justice arrests several employees of Win Semiconductors, a leading GaAs foundry, for stealing proprietary information and passing it to Chengdu GaStone, a PLA-linked semiconductor firm on the U.S. Entities List.

Year: 2016

Description: CFIUS blocks a $713 million bid by a Chinese firm for the U.S. arm of German GaN chipmaker Axitron, citing threats to U.S. national security.

Year: 2018

Description: The U.S. Department of Justice indicts two individuals for stealing confidential technologies from Wolfspeed, a leading GaN manufacturer in the United States (and a major supplier for the U.S. military). The stolen technologies were being transferred to two of the PLA’s primary centers for radar development, AVIC 607 and CETC’s 14th Research Institute.

Year: 2023

Description: Efficient Power Conversion Corp (EPC), a major U.S. GaN firm, files a complaint in U.S. courts against Innoscience, alleging that Innoscience recruited two EPC employees for executive roles shortly before introducing a suite of products visibly identical to EPC’s.

These efforts have paid dividends for China’s military modernization and exemplify Beijing’s military-civil fusion strategy, a sweeping push to fuse together the country’s security and development goals.

Top personnel at China’s leading military radar manufacturer, China Electronics Technologies Group Corporation (CETC), claimed in 2018 to have developed state-of-the-art GaN-based radar technologies “comparable in performance to those used by the [United States’] F-22 and F-35.”

Even more recently, in 2021 CETC released a family of next-generation GaN-backed radar systems called “Lingdong” (灵动), which it claims can easily detect stealth aircraft and cruise missiles, and in 2023, Chinese academics published a paper outlining plans for an advanced naval radar system that will likely use GaN technology. The new system will reportedly be capable of detecting targets as far away from China as Australia or Guam.

▲ YLC-8E Radar.

Growing momentum in commercial applications of GaN, including 5G, is reshaping market dynamics. While many American, European, and Japanese firms maintain a technological edge, several Chinese companies, empowered by financial and political support from Beijing, have emerged as key players in the production of gallium-based chips.

Innoscience, a leading Chinese manufacturer of gallium-based chips, operates two of the world’s largest GaN fabrication facilities and has expanded overseas with offices in the United States, Europe, and South Korea. It has benefited from capital and partnerships from major Korean and European firms, like SK Group and ASML, while also receiving investment from AVIC Trust, the venture capital arm of China’s military aerospace giant, the Aviation Industry Corporation of China (AVIC).

Other Chinese firms, like Suzhou Nanowin, HiWafer, and Sanan IC, are following closely. An executive from Suzhou Nanowin boasted recently that the company had aims to capture 30 percent of the global market share for GaN substrate production.

Looking Ahead

Losing ground to Chinese firms in the race for more capable and powerful compound semiconductors will put the United States on the back foot in developing next-generation technologies that will be crucial to military power and economic competitiveness. Beijing’s active role in creating a flourishing domestic ecosystem for gallium-based chips has already benefited China’s military development.

Moreover, if China continues to dominate the raw supply of gallium while also achieving the leading edge of gallium-based chip production, the country can largely insulate itself from global supply chain shocks in the field. China’s recent export restrictions on gallium suggest an increased level of confidence that Beijing can inflict pain on others while limiting blowback on Chinese companies.

When the United States met with the other leading G7 economies in May 2023, the leaders jointly called for “de-risking” from economic competitors like China. De-risking gallium supply chains offers low-hanging fruit for U.S. and allied policymakers to address together as they reassess their economic relationships with Beijing.

No country can be fully self-reliant in natural resources, and China will remain a key player in critical minerals markets. Yet by making targeted investments at home and working strategically with allies, the United States can reduce its reliance on China and de-risk critical supply chains from disruptions.

The U.S. government, alongside its allies and partners, should focus its response around five measures:

1. Invest in gallium extraction and refinement capabilities in the United States. The U.S. government should make targeted investments to provide the conditions for firms to establish and maintain gallium production facilities, supported by the Department of Defense through Defense Production Act authorities.

2. Collaborate with allies and partners to scale up overseas gallium extraction and refinement capacity. The United States should establish partnerships or build upon existing frameworks with Germany, a former major gallium producer, and Australia, a leading bauxite ore exporter, to create conditions for scaling up gallium production.

3. Promote gallium recycling. Prioritizing gallium recycling can help alleviate short-term supply chain issues, and the United States and its partners should invest in expanding existing recycling capabilities.

4. Maintain a minimum one-year stockpile of gallium for the defense industry. The Department of Defense’s Defense Logistics Agency — in consultation with Congress — should add gallium to the National Defense Stockpile, collaborating with private industry and foreign partners to ensure at least one year’s coverage of U.S. defense needs.

5. Enhance data collection and transparency in U.S. gallium production and consumption. Improved access to official data on more steps in the gallium supply chain would help policymakers, defense officials, and private sector actors better assess the state of the market and U.S. vulnerabilities.

Matthew P. Funaiole is vice president of iDeas Lab, Andreas C. Dracopoulos Chair in Innovation and senior fellow of China Power Project at the Center for Strategic and International Studies (CSIS). He specializes in using data-driven research to unpack complex policy issues, specifically those related to Chinese foreign and security policy, cross-Strait relations, and maritime trade.

Brian Hart is a fellow with the China Power Project at CSIS, where he researches the evolving nature of Chinese power. His particular research interests include Chinese foreign and security policy, Chinese military modernization, and U.S.-China technological competition.

Aidan Powers-Riggs is a research associate for China analysis with the iDeas Lab at CSIS, where he primarily supports the Hidden Reach special initiative.