Manufacturing Chokepoints in Critical Mineral Supply Chains

Manufacturing chokepoints are stages in the critical minerals value chain where production capacity is concentrated in a small number of countries, companies, or facilities to such a degree that disruption at any single node could cascade through downstream industries. Unlike supply risks at the mining stage, which are at least partially visible through geological survey data, manufacturing chokepoints are often hidden deep in multi-tier supply chains, invisible to end consumers and frequently underestimated by policymakers until a crisis occurs. The concept gained mainstream attention during the COVID-19 pandemic, when disruptions to semiconductor manufacturing in Taiwan and battery material production in China exposed the fragility of supply chains that had been optimized for cost efficiency rather than resilience.

Battery Cell Manufacturing

The lithium-ion battery supply chain is among the most concentrated manufacturing ecosystems in the global economy. China accounts for approximately 77 percent of global battery cell production capacity, with CATL and BYD alone controlling over 50 percent of the global market. South Korea (LG Energy Solution, Samsung SDI, SK On) and Japan (Panasonic) account for most of the remainder. The European Union and United States, despite enormous policy effort and billions of dollars in subsidies, still represent less than 10 percent of global cell production combined.

The chokepoint extends beyond cell assembly to the intermediate manufacturing stages that feed it. China produces over 70 percent of the world's battery cathode materials, over 90 percent of battery anode materials (predominantly synthetic and natural graphite), over 70 percent of electrolyte, and over 50 percent of separator film. Each of these components represents a distinct manufacturing chokepoint with its own geographic concentration and capacity constraints. A shortage of high-purity electrolyte solvent or a disruption to separator film production could halt battery cell manufacturing just as effectively as a shortage of lithium or cobalt.

Permanent Magnet Manufacturing

Sintered neodymium-iron-boron (NdFeB) permanent magnets are the strongest commercially available magnets and are essential components in electric vehicle traction motors, wind turbine direct-drive generators, industrial robots, and precision-guided weapons. China produces over 90 percent of the world's sintered NdFeB magnets, a concentration even more extreme than its dominance of rare earth mining and separation.

Magnet manufacturing involves a sequence of tightly integrated steps: alloy strip casting, hydrogen decrepitation, jet milling to produce fine powder, magnetic alignment and compaction, sintering at temperatures above 1,000 degrees Celsius, machining, surface treatment, and magnetization. Each step requires specialized equipment and process expertise. The alloy composition must be precisely formulated with grain boundary additives (such as dysprosium or terbium) to achieve the required coercivity for high-temperature applications. Even slight deviations in powder particle size distribution, alignment field strength, or sintering profile can render an entire production batch unusable.

Efforts to establish non-Chinese magnet manufacturing include VAC (Vacuumschmelze) in Germany, Shin-Etsu Chemical in Japan, and the emerging facilities being developed by MP Materials in the United States and Less Common Metals in the United Kingdom. The U.S. Department of Defense has funded several programs to establish a domestic magnet supply chain for defense applications, recognizing that dependence on Chinese magnets for F-35 fighter jets and guided missiles poses an unacceptable national security risk.

Semiconductor Materials

The semiconductor industry depends on several critical minerals processed into ultra-high-purity materials, including gallium arsenide (GaAs) and gallium nitride (GaN) wafers, germanium substrates, silicon carbide (SiC) crystals, and high-purity quartz crucibles. China's 2023 export controls on gallium and germanium directly targeted semiconductor supply chains, as China produces approximately 98 percent of the world's primary gallium (as a byproduct of alumina refining) and 60 percent of refined germanium.

The concentration in semiconductor materials extends to other chokepoints as well. Japan's Shin-Etsu and SUMCO control approximately 60 percent of global silicon wafer production. Belgium's Umicore and South Africa's Anglo American Platinum dominate the supply of germanium and PGM-based catalysts used in semiconductor manufacturing processes. Taiwan Semiconductor Manufacturing Company (TSMC) fabricates the majority of the world's advanced chips, creating a single-point-of-failure risk that has become a central concern in U.S.-China geopolitical competition.

Catalytic Converter and Fuel Cell Manufacturing

Platinum group metals (PGMs) are essential catalysts in automotive catalytic converters and proton exchange membrane (PEM) fuel cells. South Africa produces approximately 70 percent of the world's platinum and a significant share of rhodium and iridium. Russia contributes about 40 percent of global palladium supply. The concentration of PGM production creates manufacturing chokepoints for both the automotive industry (which uses catalytic converters on virtually all internal combustion engine vehicles) and the emerging hydrogen economy (which depends on platinum and iridium catalysts for fuel cells and electrolyzers).

The sanctions imposed on Russia following the 2022 invasion of Ukraine highlighted the vulnerability of PGM supply chains. While Russian palladium was not formally sanctioned by most Western governments due to concerns about supply disruption, the conflict demonstrated how geopolitical events in producer countries can rapidly alter market dynamics. Thrifting (reducing the amount of PGM per unit), substitution (replacing palladium with platinum in gasoline catalysts), and recycling from end-of-life catalytic converters are all strategies being employed to reduce dependence on primary PGM production.

Advanced Alloy and Superalloy Production

Superalloys, which maintain their strength at temperatures exceeding 1,000 degrees Celsius, are essential for jet engine turbine blades, gas turbines, and rocket engines. These alloys contain critical minerals including cobalt, nickel, rhenium, tungsten, tantalum, and hafnium. Production is concentrated among a small number of specialized manufacturers, including Precision Castparts (owned by Berkshire Hathaway), Rolls-Royce, Safran, and Howmet Aerospace, primarily in the United States, United Kingdom, and France.

The chokepoint in superalloys lies not in the sheer volume of material but in the extreme quality requirements and specialized manufacturing processes. Single-crystal turbine blade casting, for example, requires growing an entire blade as a single metal crystal using directional solidification, a process that tolerates zero defects. The supply chain for rhenium, a critical addition to single-crystal superalloys, is particularly constrained: global production is only about 50 tonnes per year, sourced primarily as a byproduct of copper and molybdenum mining in Chile, the United States, and Poland.

Addressing Manufacturing Chokepoints

Governments and industry are pursuing several strategies to mitigate manufacturing chokepoints. The U.S. Inflation Reduction Act and CHIPS and Science Act provide tax credits and subsidies for domestic battery, semiconductor, and critical mineral manufacturing. The EU Critical Raw Materials Act sets benchmarks for domestic processing and recycling capacity. Japan's economic security legislation identifies specific materials and technologies for supply chain diversification. Friend-shoring, the strategy of sourcing from allied nations rather than geopolitical competitors, is reshaping trade patterns and investment flows across the critical minerals sector.

However, building manufacturing capacity is far slower and more expensive than the policy announcements suggest. A new battery cathode plant requires two to four years to build and an additional one to two years to qualify with customers. A rare earth magnet facility requires even longer to achieve consistent production quality. The manufacturing chokepoints that have developed over decades of Chinese industrial policy will take at least a decade of sustained Western investment and technological development to meaningfully diversify.