The rare earths market is once again raising alarms. In just one year, the price of yttrium—one of the key elements for semiconductor manufacturing—has gone from around $8 per kilogram to approximately $126 per kilogram. That’s nearly a 1,500% increase in just 12 months, according to data cited by Bloomberg.
This historic surge isn’t the result of a simple market fluctuation but is driven by a volatile cocktail: rising geopolitical tensions, an open trade war between the United States and China, and the extreme concentration of rare earth production in China.
What is yttrium and why is it so important for chips
Yttrium is a chemical element classified as a “rare earth,” though in reality, it isn’t as scarce in the Earth’s crust as its name suggests. Its main issue isn’t geological availability but rather the concentration of its extraction and refining in a few hands, primarily in China.
In the semiconductor industry, yttrium is used in critical processes such as:
- Thin-film deposition
- Wafers polishing
- Some advanced manufacturing processes that require highly stable materials with specific properties.
When the price of such a specialized material multiplies by 10, 15, or more in a short period, the impact quickly transmits along the entire value chain: from chip factories to consumer electronics manufacturers, as well as automotive, telecommunications, and practically any sector relying on advanced components.
A trade war spilling into the laboratory
The tensions between Washington and Beijing have been brewing for years, but the turning point came when the U.S. decided to implement broad tariffs on its main trading partners, with China at the center.
In response, both powers have entered a spiral of measures and countermeasures, including:
- Tariffs of up to 145% on Chinese goods entering the U.S.
- Reciprocal tariffs of 125% on American products arriving in China.
Within this context, rare earths—especially yttrium—have become a kind of “silent weapon” within the conflict. It’s not just about direct sanctions but also about export restrictions, tighter controls, contractual uncertainty, and fears of future bans.
All these factors have fueled a perception of scarcity, which, combined with industry dependence on these materials, has driven prices skyward.
Margins under pressure: the impact on chip factories
Semiconductor manufacturers were already facing multiple challenges:
- Rising energy costs.
- High demand for chips for AI, data centers, and automotive applications.
- The need to invest billions in new, cutting-edge factories.
The skyrocketing price of yttrium now adds another destabilizing factor. Although this element isn’t the most volumetrically significant in the chain, its role in very specific processes can create a bottleneck.
For large foundries with long-term contracts, this increase puts intense pressure on margins and prompts renegotiation with clients. For smaller or specialized players—particularly in niches like power chips, sensors, or communication components—the situation may be even more delicate: lower capacity to absorb additional costs and more difficulty passing them onto the end customer.
Risks across the entire technological supply chain
What might seem, at first, to be a technical issue within the semiconductor industry actually has a much broader scope:
- Consumer electronics: smartphones, computers, gaming consoles, and IoT devices could become more expensive if chip manufacturers pass on costs.
- Automotive: electric vehicles and advanced assistance systems depend increasingly on complex semiconductors.
- Telecommunications and 5G: modern networks utilize hardware that is highly sensitive to cost and supply variations.
- Defense and aerospace: sectors where supply chain reliability is a strategic concern.
The combination of an open trade war, strong dependence on a single country for refining rare earths, and growing chip demand makes yttrium a perfect symbol of the structural vulnerabilities of today’s global technology model.
Are there real short-term alternatives?
On paper, several strategies exist to reduce this extreme dependence:
- Geographical diversification: encouraging extraction and refinement of rare earths in other countries.
- Advanced recycling: recovering yttrium and other critical elements from electronic waste and industrial scrap.
- Technological substitution: researching alternative materials or processes that reduce yttrium usage.
However, none of these solutions are immediate. Opening new mines and, especially, establishing new refining capacity takes years, influenced by environmental regulations, heavy investments, and technical challenges. High-purity recycling requires developing logistical chains and technologies that are not yet widely deployed at scale. Replacing a material in a critical chip manufacturing process also involves redesigning, recalibrating machinery, and ensuring reliability—things that don’t happen overnight.
Meanwhile, the industry is forced to navigate between actual scarcity and perceived risk, with tighter contracts, force majeure clauses, and greater price volatility.
A wake-up call about the “geopolitics of the atom”
The yttrium case underscores a lesson the industry has already experienced with other materials and components: when a critical element is concentrated among a few players, any geopolitical tension can trigger an industrial crisis.
In a world where chips are the “new oil” of the digital economy, geopolitics is no longer confined to oil pipelines or cargo ships but also involves rare earth mines, refining plants, and advanced materials labs.
The nearly 1,500% increase in yttrium’s price within a year is not just a remarkable figure; it’s a clear signal of how deeply technology, politics, and economics are intertwined—and how a trade war between two powerful nations can end up making almost all daily-use devices more expensive.
Frequently asked questions about yttrium and its impact on the semiconductor industry
What exactly is yttrium and why is it considered a “rare earth”?
Yttrium is a chemical element classified as a rare earth because it is typically found mixed with similar elements, and its separation and refining are complex. It’s not extremely scarce in nature, but its production is highly concentrated in a few countries, creating vulnerabilities in the supply chain.
Why is yttrium so important for chip manufacturing?
It is used in critical processes such as thin-film deposition and silicon wafer polishing. These steps are essential for producing high-performance chips with low defect tolerance. A sudden price spike or supply shortage can significantly increase costs and delay production.
How does the US-China trade war affect yttrium prices?
Trade tensions have led to high tariffs and a regulatory uncertainty that makes the market volatile. With China being a dominant player in the rare earths value chain, any restrictive measure—actual or feared—quickly results in price hikes and preemptive buying by industry actors.
What can semiconductor manufacturers do to reduce dependence on yttrium?
Companies are exploring multiple avenues: diversifying suppliers and regions, investing in recycling critical materials, optimizing processes to reduce yttrium use, and researching alternative materials. However, all these strategies require time, investment, and coordination between governments and industry.
via: tomshardware