The United States semiconductor industry still depends on China for key materials and equipment, according to a new report. The findings highlight the challenges facing efforts to reduce US technology links with Beijing amid rising trade and security tensions.
More than 5% of the equipment and materials supplied to US chipmakers come from China, the report found. China also controls about 90% of the rare earth supply needed to manufacture semiconductors.
These figures show that US technology companies remain tied to Chinese supply chains, even as Washington seeks to limit China’s role in critical industries. Building alternative sources for essential materials could take time and require major investment.
The findings also point to a wider challenge. The US technology sector relies not only on physical goods from China but also on some of its low-cost, open-source artificial intelligence tools.
Kyle Chan, an artificial intelligence specialist at the Brookings Institution, described the links between the two countries as deep and difficult to separate.
“We’re so deeply intertwined,” Chan said, adding that there was “a lot of actual dependency.”
The reliance creates a complex problem for US policymakers. Washington has sought to strengthen domestic chip production, restrict access to sensitive technology and reduce the risks posed by dependence on a strategic rival. Yet many supply chains still cross national borders, making a rapid break difficult.
Semiconductors are essential to modern technology. They power smartphones, computers, cars, data centres and advanced military systems. The chips also support the growth of artificial intelligence, which has become a major source of competition between the United States and China.
Producing advanced chips requires a wide range of materials, tools and specialist components. Rare earth elements and other critical inputs can be difficult to replace because their mining, processing and supply networks are concentrated in a small number of countries.
China has a major role in the rare earth industry, including the processing of materials used in high-tech manufacturing. This position gives Beijing influence over supply chains that support the US semiconductor sector.
Reducing that reliance would require the United States and its partners to expand other sources of supply. New mines, processing plants and manufacturing facilities can take years to build. Companies must also ensure that replacement materials meet strict quality and performance standards.
The report’s findings suggest that efforts to create a clear separation between the US and Chinese technology sectors face practical limits. Even if Washington restricts certain products, companies may still depend on Chinese suppliers for other parts of their operations.
The challenge extends into artificial intelligence software. US startups and technology firms have increasingly used cheaper, open-source AI models developed in China. Such systems allow developers to build and adapt AI tools without relying entirely on expensive commercial products.
Open-source models can help smaller companies lower costs and test new ideas. They may also allow developers to modify software for specific tasks, making them useful across different industries.
However, their growing use has raised questions about technology security and national dependence. If US firms rely on Chinese AI tools, policymakers may face difficult choices between limiting potential risks and protecting access to affordable technology.
The debate became more visible when the Trump administration considered a possible ban on Chinese open-source AI. Nearly 300 US firms spoke out against the proposal, according to the report.
Their response showed the commercial importance of these tools to parts of the US technology sector. A ban could force companies to find replacements, adjust their products or pay more for alternative systems.
One analyst described the issue as a moment when open intelligence itself becomes a geopolitical dependency. The concern is that software designed to be widely shared can still create reliance on the country where it was developed.
The dispute reflects a wider tension in US technology policy. Officials want to protect national security and reduce dependence on China, while businesses need reliable supplies and affordable tools to remain competitive.
A complete separation could raise costs and disrupt innovation. At the same time, continued dependence may leave US companies exposed to export restrictions, supply shortages or changes in political relations.
The latest report does not suggest that the United States cannot develop alternative suppliers or AI systems. Instead, it highlights the scale of the task and the links that already exist between the two technology economies.
As competition between Washington and Beijing continues, US policymakers will have to balance security goals with the practical needs of industry. The country’s ability to build more resilient supply chains may depend on how quickly it can expand alternative sources for critical materials and software.
