Completely Unhooked: US to Build Military Supply Chain without Chinese Materials

Despite the US government not mentioning unhooking from China in terms of trade, plans to completely decouple the Pentagon’s defense supply chain from China are slowly progressing.

According to The Wall Street Journal, US defense technology startups are seeking new suppliers, excluding China. The next generation of companies is learning to manufacture high-tech weapons without the need for Chinese materials.

One of the largest defense startups, Anduril Industries, has reduced its spending on parts sourced from China to just 0.2% of its total supplier budget, according to CEO Brian Schimpf.

Startup Empirium in Southern California operates a procurement website selling products from friendly countries without Chinese components, while SolidIntel in Virginia uses AI-generated data sets to identify supply chain risks, such as relationships between suppliers and the Chinese government.

US defense officials and industry executives anticipate restrictions on Chinese-produced electronics and batteries in the future. The US has also established new magnet production companies to weaken China’s dominance in the magnet sector. Over 90% of the magnets needed for various equipment from missiles to ships, drones, and satellites come from China.

Given the escalating tensions between the US and China and the vulnerabilities exposed by globalization in the supply chain due to the pandemic, rebuilding domestic manufacturing and reducing reliance on Chinese materials are top priorities for both US political parties.

President Biden signed an executive order in his first month in office to establish a “resilient US supply chain.”

Under the framework of the 2019 Defense Production Act, the Pentagon has been promoting domestic production of critical minerals for years, and the Biden administration is expanding it to battery materials.

In the fall of 2023, the US Congress approved a $1 billion appropriation for defense reserves to purchase strategic and critical materials, a crucial step in establishing additional buffer stocks in case of crises and supply chain disruptions.

Earlier this year, the Pentagon released its first strategic document for defense contractors, emphasizing supply chain flexibility as one of its four main priorities. A subsequent network-centric strategy also underscored supply chain security and risks.

Assistant research fellow Wang Xiuwen from Taiwan’s Institute for National Defense and Security Studies told Dajiyuan that the US now views the CCP as its main global competitor or even primary threat, not ruling out the possibility of military conflict. To prevent the CCP from gaining access to sensitive military data and to ensure key components or rare earth sources are not restricted by the CCP, building a defense supply chain that does not involve China is more urgent and necessary than creating non-red supply chains for semiconductors or other commercial products.

Components made in China have been infiltrating the US military supply chain for over a decade. In 2012, the US Senate Armed Services Committee found counterfeit parts from China in global hawk drones, submarine imaging systems, and Stryker wheeled guns.

Two years ago, a Pentagon subcontractor used Chinese metal materials in F-35 jet engines, leading the Air Force to halt production until the safety of these materials was verified.

Chinese companies have also attempted to embed themselves in the US military supply chain by disguising themselves as American companies. For example, if yous company claims to be 100% American-owned but is actually a subsidiary of Wanxiang Group, a Chinese company based in Hangzhou.

Data from Govini shows that 41% of semiconductors in US weapons systems and related infrastructure came from China last year.

Between 2018 and 2022, there were 471 Chinese companies among the primary suppliers of semiconductors and related equipment to the US defense industry, more than any other country outside the US.

The CCP has also utilized government subsidies and low labor costs to lower the costs of mineral extraction and processing, dumping key minerals at low prices in the international market to crush competitors and dominate the supply chain.

Currently, China is the world’s largest producer and holder of rare earths, with total production of 240,000 tons in 2023, accounting for two-thirds of the global total; it also holds 40% of the global reserves of 17 key rare earths.

High-performance magnets made from rare earth materials such as neodymium, dysprosium, and praseodymium used in aircraft engines and flight control systems all come from China.

In a report issued in July of last year, the Washington think tank Center for Strategic and International Studies stated that the CCP has nearly monopolized gallium, which is crucial for producing high-performance microchips used in some of the most advanced US military technologies.

Relying on Chinese supply chains poses many risks to US national security and defense security. Su Ziyun, Director of the Institute for Strategy and Resources at the Taiwan Institute for National Defense and Security Studies, told Dajiyuan that, “The first is political risk, meaning if Beijing tensions with specific countries, it could stop exporting certain raw materials or components.”

In 2010, when tensions rose between China and Japan over the Senkaku Islands, the CCP halted rare earth exports to Japan.

In recent years, the trend of weaponizing rare earths by the CCP has intensified. Starting in August 2023, China implemented export controls on gallium and germanium, widely used in semiconductors and electric vehicles. In December 2023, rare earth technology was included in the “China Prohibition of Export Restriction on Export Technology Catalog.” On October 1, 2024, the “Rare Earth Management Regulations” were implemented to protect rare earth resources, establish a total control over rare earth mining and separation, set up product traceability systems, and strictly manage the circulation of rare earth products.

Su Ziyun said, “The second risk is technological: If Beijing has specific intentions, it could tamper with these chips or components, steal electronic intelligence, or engage in physical destruction, i.e., skimp on materials, causing the equipment’s design performance to deteriorate prematurely and become unable to fight.”

While the US and China are heavily interlinked in terms of trade and investment, Washington is successfully achieving its military decoupling goal. The US holds significant advantages; its economy is more flexible, innovative, and has more alternative suppliers compared to China.

In June 2022, the Minerals Security Partnership (MSP), consisting of 15 members, was established under US leadership to reduce reliance on China for rare earths and other minerals.

MSP’s current projects include the Kabanga nickel project in Tanzania, the Electra battery materials project in Canada, the Cinovec lithium project in the Czech Republic, and a rare earth mining project in Turkey. Turkey recently discovered the world’s second-largest rare earth deposit and plans to cooperate with MSP members.

Su Ziyun stated that completely decoupling from China in the defense supply chain is feasible, as the US overwhelmingly dominates. Initially highly reliant on China for raw materials and rare earths, efforts over the past six years have significantly reduced the CCP’s ability to weaponize rare earths.

“For other components, including metal processing and chips, while many of the US weapons rely on Chinese chips, roughly about 40% to 50%, these are low-end chips. The US and its allied countries have the capability to produce them; it’s just a pricing issue. By excluding China from the supply chain, the US can now turn to trusted allied nations for these components.”

Wang Xiuwen explained that in the long term, the US is likely to continue progressing towards completely decoupling from China in the defense supply chain, a policy that both presidential candidates would push for.

“In the short term, due to deep prior reliance on China, completely decoupling immediately is not feasible. Therefore, efforts will continue to be made on components with lower threat levels by continuing to use Chinese products. Meanwhile, backup sources will be added for rare earths and critical components to reduce reliance on China. In addition, in critical advanced technology fields such as biotechnology, nuclear modernization, hypersonics, space technology, artificial intelligence, quantum computing, etc., complete decoupling will be implemented, even preventing China from entering future product supply chains.”

Wang Xiuwen further noted that the CCP is likely to flex muscles in the vicinity due to economic difficulties, leading to continued military standoffs between the US and allies versus China, or a rise in such military standoffs.

“However, the CCP’s main goal is to maintain its regime and is unlikely to escalate minor conflicts to catastrophic levels. This kind of small-time muscle-flexing and intimidation probably becomes a common practice for the CCP’s military both internally and externally.”

Su Ziyun explained that the medium to long-term trend is the deterrence of Western countries, eventually leading to comprehensive deterrence. Comprehensive deterrence means encircling the CCP in all aspects—military, economic, and technological—preventing the CCP from gaining access to new technologies.

“Then, the CCP won’t dare to act recklessly militarily and economically but will maintain a high level of market leadership in democratic countries. This way, the risks posed by the CCP, potential dangers, are minimized.”