Critical-Mineral Supplies to Japan Tighten Sharply: Is the Real Semiconductor Bottleneck Resources—or Usable Materials?

When China's supply of critical minerals to Japan tightens sharply, the first question for Japanese industry is not whether rare-earth deposits still exist somewhere in the world. It is whether manufacturers can obtain materials that are ready for production, in the required form and on the required timetable. By May 2026, Chinese exports to Japan of dysprosium, terbium and yttrium oxide had fallen to very low levels, while supplies of gallium and other critical minerals were also affected.[1] For the semiconductor industry, the risk is particularly important because the hardest thing to replace is often not the mineral resource itself, but a specific material that has been separated, refined, purified and brought within manufacturing specifications.

Japan has not been standing still. Sojitz and Australia's Lynas have established a supply route linking mining in Australia, separation and refining in Malaysia, and delivery to Japan. Supplies of dysprosium and terbium to Japan began in October 2025 and are ultimately expected to cover roughly 30% of domestic demand. In March 2026, the two sides also moved to expand the range and volume of medium and heavy rare earths supplied to Japan and to explore new mine development.[2] This shows that Japan is broadening its sources beyond China—but it also shows why alternative supply cannot be created simply by finding another mine.

Turning ore into an industrial material requires beneficiation, separation, refining and purification, followed by control of purity, impurities, particle size and lot-to-lot consistency to meet customer requirements. During its early ramp-up, Lynas also went through a process of bringing product quality and specifications into line with Japanese customer requirements.[2] There is therefore often a significant time gap between “having a resource” and “being able to supply it reliably.” For semiconductor materials in particular, changing suppliers also requires equipment compatibility checks and quality qualification, so the existence of reserves in another country does not translate into an immediate substitute.

Yttrium oxide is a useful example. A Japanese Ministry of Economy, Trade and Industry supply-chain study notes that yttrium oxide is used in protective coatings for components such as chamber walls and electrostatic chucks in semiconductor etching equipment, helping reduce contamination in plasma environments. Separation and refining have long been highly concentrated in China, while the development of substitute materials remains limited.[3] Such materials may account for only a small share of the total cost of a chip, but they affect equipment maintenance, particle contamination and yield. The main risk is therefore not simply how much the material price rises; it is the amplified effect that a supply interruption can have on production stability.

Building an alternative source therefore involves much more than the price of the ore itself: separation and refining, quality qualification, supplier switching and additional inventory all create extra cost. New separation and refining capacity requires investment; new suppliers must pass qualification; and companies may need higher inventories and multiple sources to protect against disruption. As Japan, the United States and Europe all seek to diversify critical-mineral supply, demand for non-China supply-chain capacity will also increase. In mid-June, the G7 called for stronger stockpiling, investment and supply-chain coordination for critical minerals,[4] showing that policy attention is moving from simply “finding resources” toward building complete supply systems that industry can actually use.

For Japan's semiconductor industry, the core issue is therefore not a simple switch from China to Southeast Asia, Australia or another country. The more practical challenge is whether a continuous supply chain can be built outside China—from resource development through separation and refining to high-purity materials and quality qualification. Diversification can reduce disruption risk in the near term, but it cannot immediately reproduce the existing Chinese supply system in volume, cost and quality stability. Building a stable and sustainable supply base for rare earths and other critical minerals will therefore take time.