China's Grip on AI Minerals Poses Bigger Threat Than Model Monopolies

The wrong layer is getting scrutiny

When policymakers debate concentration in artificial intelligence, they typically focus on foundation models and cloud infrastructure. Yet data compiled by researcher Piyush Akimitsu reveals that the AI model market registers a Herfindahl-Hirschman Index of just 494—squarely in the moderate concentration range, well below the 1,800 threshold for high concentration under U.S. Merger Guidelines. Cloud computing, dominated by Amazon, Microsoft, and Google with 63% market share, remains only moderately concentrated.

The genuine bottleneck sits several layers deeper: in the refined minerals that make chips, data centers, and power generation possible.

China's dominance in critical materials

China processes approximately 99% of gallium, which regulates voltage in chip circuits. It produces 87% of silicon that forms the substrate of all semiconductors. Chinese refineries handle 90% of rare-earth metals used in cooling system magnets, 79% of tungsten for chip interconnects, and 79% of cobalt for backup batteries and gas turbines. The country also refines 93% of graphite for battery storage and half the world's copper.

The United States imports nearly 100% of its gallium and natural graphite, 70-80% of rare-earth metals, and 76% of cobalt, according to data organized in Akimitsu's public dashboard at aistackmap.org.

Chip manufacturing itself shows extreme concentration—Nvidia produces 86% of AI accelerators, TSMC handles 90% of advanced chip packaging, and five firms control 90% of polished silicon wafers. But these companies are American or allied (Japanese, Taiwanese, Dutch, German). Mineral dependency on China creates a fundamentally different vulnerability.

Trade restrictions already disrupting supply

China placed gallium and germanium under export licensing in 2023, then banned direct U.S. shipments in December 2024 after expanded American chip controls. Between 2021 and 2024, U.S. germanium imports fell 68% and gallium imports dropped 77%.

Some material continues flowing through third countries—China's germanium exports to Belgium jumped 224% between 2022 and 2024, while Germany's share of U.S. gallium imports increased tenfold. But the U.S. Geological Survey estimates that closing these rerouting channels could spike domestic gallium prices 150% and germanium prices 26%, shrinking U.S. GDP by $3.4 billion.

China temporarily suspended its ban in November 2025 as part of a trade truce, allowing case-by-case sales except to military end-users. That suspension expires in November 2026.

Why it matters

Mineral concentration creates competitive distortions that antitrust enforcement cannot address. Large technology companies are securing their own supply chains—Microsoft contracted for 20 years with Three Mile Island nuclear plant, Amazon locked in 1.92 gigawatts from Susquehanna through 2042, and Google ordered small modular reactors. These firms can place multi-year orders that claim scarce turbines and transformers. If mineral supply chains fracture, the biggest AI companies will weather disruptions far better than competitors, entrenching their advantages through industrial capacity rather than innovation.

Diversification requires policy intervention

Brazil holds the second-largest reserves of graphite and rare earths; Australia has tungsten and cobalt. Both produce below potential due to insufficient refining infrastructure. Gallium exists in alumina that German, Greek, Australian, and Irish refineries already produce but discard because recovery isn't economically viable at typical prices.

Germany's Stade refinery, which halted gallium production in 2016 when Chinese competition drove prices down, plans to restart operations in 2027 with 40-tonne annual capacity. Greece's METLEN is building a 50-tonne plant with European Investment Bank financing. Alcoa is adding 100-tonne capacity at its Australian Wagerup refinery with Japanese partners and U.S.-Australian government support.

Sustaining this diversification requires price floors. In July 2025, the Pentagon signed a ten-year deal with MP Materials guaranteeing $110 per kilogram for neodymium-praseodymium, taking equity and buying the plant's entire output. Similar agreements with allied producers, combined with antidumping duties against Chinese market flooding, could stabilize global supply.

The analysis was first reported by Piyush Akimitsu in ProMarket, with supporting data available at aistackmap.org.