Rare earth elements (REEs) are once again at the heart of global economic and geopolitical tension.
After years of quiet competition, China’s mid-2025 decision to impose new export controls on five specific REEs — holmium, erbium, thulium, europium, and ytterbium — has reignited fears of a supply crisis that could echo the 2010 shock. China’s new export restrictions on five critical rare earths elements — holmium, erbium, thulium, europium, and ytterbium — are reshaping global supply chains in 2025. Explore their strategic importance in defense, semiconductors, and magnets, and what it means for 2026.
These five elements may not make daily headlines like lithium or cobalt, but their importance is enormous. They are the hidden power behind semiconductors, stealth technologies, guided missile systems, quantum sensors, precision magnets, and next-generation displays.
According to the U.S. Geological Survey (USGS 2025), China still controls around 60–65% of global REE production and 85% of processing capacity, making these new restrictions more than a trade adjustment — they’re a strategic signal to the world’s tech and defense industries.
Why These Five Rare Earths Matter More Than Ever
Holmium (Ho): The Magnetic Force Multiplier
Holmium is one of the strongest magnetic elements known to science.
It’s used in high-strength magnets, nuclear control rods, and solid-state lasers. Its magnetic field strength makes it a critical input for miniaturized defense sensors, quantum computing devices, and next-generation data storage systems.
When China announced restrictions on holmium exports in 2025, global prices spiked by nearly 38% in two months, according to Bloomberg Minerals Index data. Western producers — mainly in Australia and the U.S. — have since been scrambling to secure alternative sources or explore substitution research.
Erbium (Er): The Fiber Optic Backbone
Erbium is the invisible enabler of global communications. It’s essential in fiber-optic amplifiers — the devices that strengthen signals transmitted through undersea cables and high-speed internet lines.
In defense systems, erbium’s ability to enhance laser performance makes it vital for targeting, range-finding, and countermeasure systems.
The restriction on erbium comes at a time when semiconductor and data infrastructure projects are accelerating, with cloud demand expected to grow by over 20% annually through 2026 (IDC Global Tech Report). The potential bottleneck could hit telecoms and defense modernization programs hardest.
Thulium (Tm): The Laser Element
Thulium is among the rarest and most expensive of all REEs. It’s primarily used in solid-state lasers, X-ray devices, and portable radiation sources for security scanning.
What makes it particularly strategic is its defense application: thulium lasers are integral to infrared countermeasures used in aircraft to deflect heat-seeking missiles.
Currently, China produces nearly 90% of the world’s thulium supply. With limited stockpiles elsewhere, analysts warn that even a small export cut could lead to severe shortages and price surges in critical defense industries.
Europium (Eu): Lighting and Sensing Powerhouse
Europium, one of the first REEs discovered, remains crucial for phosphors in LED lighting, flat-panel displays, and radiation detection. It gives that distinctive red hue in displays and is also key to nuclear reactor safety sensors.
In recent years, europium has seen renewed interest due to its potential in quantum optics and advanced photonics. The restriction on europium exports is already affecting suppliers of display panels and sensor technologies in Japan, South Korea, and Taiwan — three economies deeply tied to semiconductor and display manufacturing.
Ytterbium (Yb): The Quiet Quantum Catalyst
Ytterbium might not be famous, but it’s indispensable for the quantum revolution.
It’s used in atomic clocks, quantum computing qubits, and alloy strengthening for aerospace components. Its high stability makes it the preferred element for precision measurement devices used in navigation, GPS, and advanced radar.
The European Space Agency and NASA’s deep-space navigation teams are both known to be exploring ytterbium-based timekeeping systems — meaning the export restriction could ripple far beyond commercial tech into strategic space missions.
China’s Strategy: From Market Dominance to Leverage
China’s latest REE policy is not about revenue — it’s about control.
By tightening export licenses and prioritizing domestic high-tech applications, Beijing is signaling that rare earths are a tool of strategic influence, not just industrial supply.
In 2025, the Ministry of Commerce announced that REE exports would require new end-user disclosures and “strategic use certification.” Analysts interpret this as a way to steer global value chains toward Chinese partners — or at least make rival economies more dependent on Beijing’s policy decisions.
This echoes the logic of 2010, when China briefly restricted REE exports to Japan during a diplomatic standoff. The difference in 2026: the stakes are far higher, as rare earths now underpin semiconductors, AI hardware, and defense innovation.
How the West and Asia Are Responding
United States: Strategic Reshoring Efforts
The U.S. has reactivated domestic exploration programs and fast-tracked funding under the Defense Production Act to secure critical minerals.
The Mountain Pass Mine in California — once the world’s largest REE producer — is ramping up refining capacity, backed by a $450 million government loan announced in early 2025.
The Pentagon also confirmed new contracts for rare earth magnet production in Texas and Oklahoma, aimed at cutting Chinese dependency by 50% within five years.
Europe: Recycling and Alliances
Europe is betting on circular economy models and allied supply partnerships.
Projects like REEtec (Norway) and Less Common Metals (UK) are scaling up recycling of REE magnets from wind turbines and EVs. Meanwhile, the EU Critical Raw Materials Act (2025) sets a target to process at least 40% of REEs domestically by 2030.
In parallel, European firms are forming alliances with Australia, Canada, and African nations to build more resilient, transparent supply chains.
India, Japan, and South Korea: The Asia-Pacific Hedge
Japan’s experience with the 2010 crisis made it a pioneer in diversification.
By 2026, Japan aims to source over 60% of its REEs from non-Chinese partners, supported by projects in Vietnam, India, and the Pacific.
India’s Singareni Collieries Company Limited has announced a pilot REE extraction plant to explore domestic potential — a move aligned with its “critical minerals independence” strategy.
South Korea, meanwhile, is investing in REE refining partnerships in Kazakhstan and AI-powered mineral exploration.
The Semiconductor Connection
The semiconductor sector is especially vulnerable to these restrictions.
Holmium, erbium, and ytterbium play vital roles in semiconductor lithography, doping, and laser etching processes. As fabs push into the sub-2 nm node, the purity and stability of these materials become non-negotiable.
A 2025 SEMI Global Materials Survey estimates that REE demand for chip manufacturing could double by 2028, with erbium and ytterbium seeing the fastest growth.
This dependency makes any disruption a direct threat to chip supply, defense readiness, and economic stability.
Toward 2026: The Search for Supply Security
By late 2025, the race to secure REE supply chains is accelerating.
Australia’s Lynas Rare Earths, Canada’s Vital Metals, and the U.S.-EU Minerals Security Partnership (MSP) are coordinating to stabilize prices and promote transparent sourcing.
Meanwhile, global R&D investments are targeting substitution materials and recycling efficiency.
MIT and the University of Tokyo are co-developing magnet-free alternatives using nano-structured iron-nickel composites — a project expected to yield early results by 2026.
Still, even the most optimistic forecasts suggest that China’s processing dominance will persist until at least 2030, meaning short-term volatility is inevitable.
Conclusion
The story of holmium, erbium, thulium, europium, and ytterbium isn’t just about elements — it’s about power, technology, and global balance.
As the world races toward cleaner energy, smarter devices, and more advanced defense systems, these rare earths are emerging as the quiet currency of the future. The challenge for 2026 is not just producing them, but doing so sustainably, securely, and geopolitically wisely.
As Mattias Knutsson, Strategic Leader in Global Procurement and Business Development, notes:
“The next phase of the rare earth race isn’t about who digs faster — it’s about who builds smarter. Supply resilience, strategic collaboration, and circular innovation will define who leads in the decade ahead.”
