Taiwan should reduce its dependence on China for rare earth supplies to safeguard its semiconductor industry, the Australia New Zealand Chamber of Commerce in Taiwan (ANZCham Taiwan) said on Wednesday, suggesting Australia as an alternative.
In its white paper for this year, the chamber said that Taiwan's chip sector is vulnerable because more than 95 percent of its rare earth imports come from China.
Taiwan imports about 3,000 tonnes 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.
Photo: Reuters
"In short, Taiwan’s critical mineral imports are highly concentrated in one supply source, creating a potential single point of failure," the report said.
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 said that Taiwan should diversify its supply sources to bolster industrial resilience.
The chamber recommended that Taiwan build a strategic partnership with Australia, which is 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.
However, it is debatable whether that advice is feasible, as other countries, such as the US, have struggled to stem their reliance on China's rare earths and are aggressively seeking alternatives.
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, a New York Times report said.
China dominates the sector so thoroughly because of its willingness to tolerate a refining process that consumes energy and is environmentally unfriendly, Chung-hua Institution for Economic Research President Lien Hsien-ming (連賢明) said early last month.
"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.
Responding to China's stricter rare earth controls imposed on Oct. 9, the Ministry of Economic Affairs said in a statement that the rare earths involved in the controls were different from those used in chip manufacturing, but that it would 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 last year, or 37.3 percent of the country's total exports, Ministry of Finance data showed.
The issue extends beyond semiconductors, 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, the ANZCham paper said.
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