Preface

In an increasingly tense global geopolitical situation, the impact of the U.S.-China trade war and technology competition is no longer confined to the two powers. It has gradually spread to the global economic and trade system as well as industrial supply chains. This power struggle has even extended to the upstream segment of the minerals supply chain, presenting unprecedented threats and disruptions to countries such as Taiwan that are highly dependent on international trade.

For Taiwan, the challenge is particularly acute. Although Taiwan is a major player in the semiconductor industry, it is highly dependent on Japan and other countries for the supply of many key raw materials. The statistics show that more than 90% of the upstream materials used in Taiwan’s semiconductor processes are imported from Japan. This high degree of dependence makes Taiwan vulnerable to fluctuations in the international situation and is likely to trigger a chain reaction when the global supply chain breaks down.

Another Risk in the Supply Chain: Key Materials Controlled by Others

This concern is exacerbated by a series of recent export control measures in China. Starting in July 2023, China has imposed export controls or licenses on minerals such as gallium, germanium, graphite and rare earths. These measures have an immediate impact on the global market and threaten Taiwan’s semiconductor and communications industries. For example, export controls on gallium metal could affect the supply of gallium arsenide wafers required for the manufacturing of high-frequency communication radio frequency components, thereby increasing the risk of industry disconnection.

The U.S. uses technology wars to impose a commercial blockade on China’s semiconductor industry; in turn, China controls mineral raw materials and retaliates by imposing export restrictions. Every upstream material used in Taiwan’s semiconductor processes is imported from Japan, and the market share of Japan’s top three suppliers exceeds 50%, and even 100% for some materials. If Japanese manufacturers are subject to China’s export controls on raw materials, the shortage of upstream materials will immediately affect the progress of Taiwan’s semiconductor production lines and further impact the production and delivery schedule of its wafer fabs.

Building localized production capacity for key resources and reducing material reliance on advanced countries such as Japan has become a vital strategy to enhance the resilience of Taiwan’s wafer foundries and green energy industries. Especially in the context of the global push for net-zero carbon emissions, NdFeB, a permanent magnet made from rare earth neodymium metals is even more important due to its wide application in wind power generation, new energy vehicles, and high-efficiency motors.

ITRI’s Innovation in Developing Localized Key Raw Materials

ITRI’s 2035 Technology Strategy and Roadmap aims to establish solutions and technologies for risk warning, rapid response and backup, and accelerated recovery. Thus it emphasizes the localization of semiconductor wafer manufacturing and the increase of localized technologies for key semiconductor materials and equipment.

Specifically, ITRI has set the goal of achieving 20% domestic production of semiconductor materials and 50% for the back-end assembly process. This includes the localized production of key materials such as etching and electroplating solutions, special precursors for atomic layer deposition technology, chemical mechanical planarization (CMP) materials, and various photoresists.

In terms of rare earth metals, ITRI has formulated short-, medium- and long-term development goals. In the short term, the focus is on establishing key composition analysis and evaluation technologies for rare earth permanent magnet waste sources, as well as green extraction and oxide conversion technologies for rare earth-containing sources. Mid-term goals include establishing metal oxide conversion technology, processes, and equipment integration solutions. The long-term goal is to achieve 100% domestic production of key consumables and develop formulation technology with the same magnetic effect and reduced rare earth content.

ITRI’s efforts are beginning to show results. In the field of semiconductors, ITRI is collaborating with PentaPro Materialsto develop precursors for silicon atomic layer deposition and plans to verify them in wafer fabs. In the area of extreme ultraviolet lithography photoresist, the technology jointly developed by ITRI and Advanced Echem Materials Company (AEMC) will soon enter the fab verification stage. These advances demonstrate Taiwan’s capabilities in key material R&D and lays the foundation for future mass production.

In rare earth materials, ITRI is developing technologies such as rare earth oxidation separation and purification, rare earth metal reduction and alloying processes, which are ready for scale-up and system integration. The goal is to establish refining and production facilities ranging from kilogram level to ton level to prepare for large-scale production that combines Taiwan’s local industries and introduces exotic minerals. These efforts help improve Taiwan’s autonomy in the field of rare earth materials, and moreover, provide a buffer against the risk of possible supply chain disruptions.

Conclusion

Taiwan is an island country. In addition to lacking natural resources including minerals and raw materials, it often faces losses from natural disasters such as typhoons and earthquakes. Despite its leading position in the global semiconductor industry, Taiwan relies on imports of about 90% of the key materials for upstream production, primarily from Japan and other advanced countries. In global geopolitical dynamics, Taiwan may not be the first to bear the brunt, but it has become a bargaining chip in the competition among major powers. As a result, there is a critical need to enhance the resilience of localized supply chains. To address these challenges, ITRI has embarked on innovative R&D in material technology to boost domestic production of materials for semiconductors, green energy, and electric vehicles. These achievements will also promote the application of resilience technology solutions.