Critical Material Shortages Hit US Aerospace and Chip Industries Despite Trade Deal

American aerospace and semiconductor companies are facing severe shortages of critical rare earth materials from China, forcing some suppliers to turn away customers. The shortages involve specialized elements like yttrium and scandium that are essential for jet engine coatings and advanced computer chips, with prices skyrocketing despite recent trade agreements.

American aerospace and semiconductor manufacturers are experiencing increasingly severe shortages of critical rare earth materials from China, forcing some suppliers to reject customers and halt production, according to industry sources.

The supply crisis involves specialized rare earth elements including yttrium and scandium – obscure but essential materials from a group of 17 elements that play crucial roles in defense systems, aviation technology, and computer chips. China controls nearly all global production of these materials.

Although Beijing has permitted many rare earth exports to restart following restrictions implemented in April, shipments of these critical materials continue to face significant barriers reaching American companies, according to Chinese customs records.

The trade tensions and mineral export limitations remain central issues as diplomatic discussions continue between Washington and Beijing.

Yttrium presents a particularly acute challenge, as it’s required for specialized coatings that prevent aircraft engines and turbines from overheating during operation. These protective coatings must be regularly applied to maintain engine functionality.

Since initial reports of yttrium shortages emerged in November, market prices have surged 60% and now stand roughly 69 times higher than the previous year’s levels. Manufacturing companies producing these coatings have begun implementing rationing systems, according to industry executives and commodity traders.

Two North American companies that purchase yttrium for coating production have been forced to temporarily suspend operations due to material shortages. One firm has started refusing smaller and international customers to preserve limited supplies for major clients, including engine manufacturers.

An additional company in the coating supply network recently exhausted its material inventory and ceased selling products containing yttrium oxide, according to a source familiar with the situation.

While the shortages of yttrium and scandium haven’t yet disrupted jet engine or semiconductor production, a federal government official confirmed that some American manufacturers are now experiencing “shortages” of specific rare earth materials from China.

Export data reveals the dramatic impact: China shipped only 17 tons of yttrium products to the United States during the eight months following April’s controls, compared to 333 tons in the eight months prior to the restrictions.

A White House representative stated the administration remains dedicated to securing critical mineral access for American businesses.

“This includes negotiating with China and monitoring compliance with President Trump’s agreement with President Xi, as well as developing alternative supply chains as warranted,” the official said.

The information comes from interviews with two federal officials, 14 corporate executives and staff members, traders, and industry analysts across aerospace and semiconductor sectors. Most sources requested anonymity when discussing sensitive production challenges.

China’s Ministry of Commerce has not responded to inquiries about the situation.

While current yttrium shortages haven’t disrupted engine manufacturing, producers remain vigilant about potential impacts, according to aerospace supply chain expert Kevin Michaels.

“This is a watch item and a tangible example of how China is flexing its rare earth muscle,” said Michaels, who serves as managing director at consulting firm AeroDynamic Advisory.

Engine manufacturers already face challenges meeting airline demand for replacement parts and increased production requirements from aircraft builders Boeing and Airbus.

Major American aircraft engine companies GE Aerospace, RTX’s Pratt & Whitney, and Honeywell declined to provide statements.

Beyond yttrium concerns, American semiconductor manufacturers are experiencing scandium shortages, potentially threatening production of advanced 5G computer chips, according to Dylan Patel, founder and CEO of research company SemiAnalysis.

With worldwide production measuring only several dozen tons annually, scandium serves small but critical functions in fuel cells, specialized aluminum aerospace alloys, and advanced chip manufacturing and assembly processes.

Leading American semiconductor companies depend on scandium for manufacturing chip components that “go into essentially every 5G smartphone and base station,” Patel explained.

American chipmakers have encountered delays obtaining new scandium export permits from China recently and have contacted Washington for assistance, according to two industry sources.

Many companies had sourced scandium through third-party suppliers, another federal official noted, but China mandates that license applicants identify their final users.

“Our thesis is that it is precisely the semi industry being targeted,” the federal official stated.

The U.S. Semiconductor Industry Association chose not to comment on the situation.

“The U.S. currently has zero domestic scandium production and no operational alternative sources outside China,” Patel noted, estimating that existing stockpiles likely span months rather than years.