Uprising in Myanmar: Dysprosium Shortage Could Hit the Chip Industry Hard
Just over a week ago, an armed group in Myanmar seized control of a mine previously owned by the junta-aligned NDA-K. The situation in the Southeast Asian nation highlights how geopolitical conflicts, coupled with immense human suffering, can threaten supply chains. The mine had been supplying China with heavy rare earths such as terbium oxide and dysprosium oxide, which are indispensable for both climate technology and state-of-the-art semiconductors—industries that could soon face acute supply shortages.
AI Chips Require High-Purity Dysprosium Oxide
The superpower of the heavy rare earth dysprosium oxide is its ability to prevent magnets from demagnetizing due to heat. This makes it a truly “hot” candidate for both wind turbines and electric vehicles. However, companies like NVIDIA also urgently need the metal for top-notch semiconductors. This is because the capacitors in AI chips have been made of highly refined dysprosium oxide for several years. 99.9% of this raw material comes from Chinese production. Furthermore, the main supplier country for both terbium oxide and dysprosium oxide is Myanmar, where insurgents are now occupying the rare earth mine in Kachin State.
Myanmar Is the World's Largest Exporter of Heavy Rare Earths
The market research firm Adamas Intelligence fears that the Kachin Independence Army (KIA), which is fighting Myanmar’s military junta, could disrupt the shipment of rare earth concentrates to China. These shipments have already been declining for four months, partly due to the monsoon. Last year, Myanmar delivered approximately 50,000 tons of rare earths from ion-adsorption clays to China. This allowed the country to exceed the Chinese production quota for these clays of 19,000 tons, making it the world’s largest exporter of heavy rare earths. A supply halt would almost certainly have an impact on Western industries.
Dysprosium Could Become the New Bone of Contention in the Semiconductor War
Rare earths are a bone of contention in the struggle between the USA and China over advanced technology. As a component of semiconductors and thus AI, this could apply to dysprosium to a particular degree. A few days ago, the EU followed in American footsteps and approved immense tariffs on Chinese electric cars. Following the tit-for-tat principle, China could (at least according to one theory) respond with export bans on heavy rare earths. This would catch Western industry off guard, as it has not stockpiled enough of these metals.
Quality Sufficient for Magnets, but Not for Semiconductors
China’s increasingly strict course in managing its monopoly has led Western nations to strive for a more independent supply chain for critical metals for some time. The US company MP Materials has a contract with the Department of Defense to prepare the Mountain Pass mine to extract dysprosium present in low concentrations in the ore. Solvay in France also intends to produce dysprosium, but in a quality that is only sufficient for magnets and not for semiconductors.
Last Neo Refinery Falls to China
Almost all semiconductor-grade dysprosium oxide is produced at the Wuxi refinery, which is located in China and owned by the Canadian company Neo Performance Materials. This is one of two refineries that do not yet belong to the state. However, this could soon change: after Neo spent 7 years mastering the 100-step process for producing high-purity dysprosium oxide, it is now selling 86% of its Wuxi refinery to Shenghe Resources, a Chinese company traded on the Shanghai Stock Exchange. Its largest shareholder is China’s Ministry of Natural Resources.
Rising Prices Are Likely
This tightens China’s grip on dysprosium. What this means for Western companies is uncertain. Since October 1st, companies that mine, smelt, separate, or export rare earths must implement a tracking system. In view of the trade war, which may escalate further after the US election, both companies and investors should prepare for rising prices.