Semiconductors play a crucial role in powering various electronic devices that are essential for our daily lives. However, the production of semiconductors relies heavily on four key minerals – gallium, germanium, palladium, and silicon. These minerals are facing supply chain risks, especially due to the dominance of China and Russia in their production. This dependence on foreign adversaries poses a significant threat to the semiconductor industry and the economy as a whole.
While there have been efforts to address supply chain vulnerabilities in downstream manufacturing, there is a lack of focus on the mineral inputs needed for semiconductor production. The CHIPS Act provided substantial funding for advanced chip manufacturing but did not include provisions to diversify critical mineral supply chains. This oversight leaves the semiconductor industry highly dependent on countries like China for essential minerals.
Gallium, germanium, palladium, and silicon are crucial for semiconductor manufacturing, and their supply chains need to be secured to ensure economic security. Gallium, for example, is essential for high-power electronics and is predominantly produced in China. Diversifying sources of gallium, germanium, palladium, and silicon is vital to reduce dependence on foreign adversaries.
To incentivize investments in mineral supply chains, policymakers can learn from the success of the Inflation Reduction Act (IRA) in promoting investments in EV mineral supply chains. By offering tax incentives, grants, and subsidies, the government can encourage the private sector to invest in refining infrastructure and mineral processing facilities. This will not only boost domestic production but also reduce vulnerabilities in the semiconductor supply chain.
In conclusion, securing the supply chains for critical minerals used in semiconductor manufacturing is crucial for national security and economic stability. By implementing policy recommendations such as investment tax credits, funding research and development, expanding grant eligibility, and offering direct subsidies, the United States can build resilient supply chains and reduce dependence on foreign adversaries. It is essential to prioritize these efforts to safeguard the semiconductor industry and ensure a sustainable future for critical mineral supply chains.