The Chinese Communist Party (CCP) put on a big show this week.
To celebrate the end of WW2 80 years ago, Beijing conducted a military parade in Tiananmen Square.
On display were a bunch of new hypersonic missiles, ICBMs, laser systems, fighter jets, bombers, nuclear torpedos, unmanned ground vehicles (UGVs), drones, and more.
China’s new DF-61 ICBM
The effectiveness of these weapons is largely unproven. China hasn’t been to war in many decades.
But we did see surprisingly effective performance from China’s J-10C fighter in Pakistan’s brief clash with India. Pakistan’s Chinese-made J-10 jets shot down up to 5 Indian fighters, including one $200M+ French Rafale fighter and a few Russian planes as well.
Still, we don’t know how effective China’s military would be in an all-out war. Hopefully we never find out. Anyone who dreams of war with a nation of 1.4 billion people and 1/3rd of total global manufacturing capacity is certifiably insane.
Some analysts were impressed by China’s parade, others brushed it off as hollow bluster.
But beneath the surface, there’s a more important message being conveyed.
Back to Rare Earths (Again)
All of the weapons China showcased in its parade require vast amounts of rare earths.
Rare earth magnets have become a critical aspect of all things high-tech, but especially in the military realm.
High temperatures and extreme g-forces require robust electric motors and actuators, and that means magnets made with rare earth elements.
And as we know, China still produces roughly 90% of the world’s supply of rare earths. They have perfected the separation, refining, and manufacturing of magnets using these elements.
As we have cut off their access to AI hardware such as NVIDIA GPUs, China has in turn restricted our access to these critical elements and the magnets made with them.
For now, China is still supplying rare earth magnets to civilian manufacturers such as auto makers. But U.S. defense companies are essentially cut off.
This is a big deal. And it’s why the Department of Defense is backing companies like MP Materials to mine, refine, and manufacture rare earth products.
Gallium, Too
Gallium isn’t a rare earth, but it is a critical mineral required for key military technologies.
And unfortunately, China also has a near-monopoly on this material.
From the South China Morning Post:
In addition to the spectacle of Wednesday’s military parade in Tiananmen Square, with its rows of never-before-seen weapons and equipment, was a less visible but highly consequential shift.
At its heart lies China’s growing dominance in gallium nitride (GaN) semiconductor technology, giving it a strategic advantage that is reshaping the global arms race, according to a report by the Chinese Academy of Sciences’ Institute of Physics.
“Behind this technological advancement lies a ‘hidden thread’ of semiconductor development: China’s GaN-based semiconductor technology has reached maturity,” it said in the report, which was also released on Wednesday.
Gallium nitride semiconductors are used in the newest generation of phased-array radars. The SCMP goes on to explain the advantages of this technology:
The basic principle of phased array radar can be compared to two waves crossing in the same direction: where wave peaks align, they reinforce each other and the resulting combined wave changes in direction and shape.
By replacing each emission area on the radar with an individual transistor transmission unit and directly controlling the emission phase of each wave source in the array, the radar can rapidly steer and scan without physically moving.
This approach not only enables extremely fast scanning and the simultaneous formation of multiple beams but also offers significantly improved reliability and accuracy over conventional radar.
According to SCMP, China is the only nation deploying this tech at scale.
The reason is simple. Gallium is a byproduct of aluminum smelting. China is a leader in aluminum production, gallium extraction, and now also the production of gallium semiconductors.
A Wake-Up Call
China has spent the last 30 years developing expertise in areas other nations didn’t want to touch.
Rare earths and metal processing are dirty businesses with high environmental costs, so most countries have been happy to outsource the work to China.
But this plan has backfired spectacularly. China now has unrivaled experience in these critical areas of material science.
We need to catch up quickly. It will require vast investment by both the government and private sector.
My fear is it will take at least a decade to get up to speed. Mines take years to permit, let alone build. Separation and refining is a science of its own we need to catch up on. Then there’s the entirely separate process of building the magnets. A number of companies are working on these issues, but it’s not going to be a fast process.
The one nation that could assist us in these ventures is… China. And as the situation stands today, that is obviously not going to happen.
Eventually we’ll either have to reach a deal with China, or spend the decade-plus it will require to develop our own expertise.
In the meantime, our defense and tech industries risk being left behind. There are no easy solutions here.
We’ll be keeping a close eye on this story and will keep you updated.
