【By Guan察者网, Yuan Jiaqi】
At the beginning of June, the highly anticipated next-generation gaming console from Nintendo, Switch 2, officially launched globally. The U.S. media outlet The Wall Street Journal cited a disassembly report on the 11th, stating that unlike the original console and detachable controllers connected via sliding clips, the Switch 2 uses neodymium magnets (also known as neodymium-iron-boron magnets) to attach the controller to the console.
Neodymium magnets are the most common rare earth magnets, and China is the world's largest producer of neodymium magnets, with a production volume accounting for more than 90% of the global total. The report stated that this means the new product from Nintendo may be vulnerable to changes in Chinese regulatory measures on its supply chain.
According to sources familiar with the Switch supply chain, to avoid the impact of U.S. tariffs, Nintendo has moved some production from China to Vietnam. However, the supply situation of the magnets used in the controllers indicates that reducing reliance on the Chinese supply chain is not an easy task.
Previously, industry insiders revealed that China is establishing an export licensing system for key minerals and rare earth magnets. According to The Wall Street Journal, the current export licensing system in China encourages companies to complete the entire production process of components within China. Because the export of rare earths themselves or magnets containing rare earths requires a license, while large components containing such magnets (such as speakers, headphones, or game controllers) can be exempted.
According to people familiar with Nintendo's supply chain, China's regulations have made it more difficult to export rare earths, while simplifying the export procedures for complete components.
Guo Mingzhi, an analyst at Tianfeng International Securities, told U.S. media that in order to reduce geopolitical risks, more and more companies are now choosing to process rare earth components in China before exporting them.
"The export control of rare earths may still remain an important leverage for China in trade negotiations with the United States," he added.
Screen capture from the Switch 2 promotional video
As part of the "truce" in U.S.-China trade, China is accelerating the approval of export applications for controlled items that meet the conditions. However, U.S. media believe that if the U.S. takes further tariff actions, China may quickly restore related restrictions.
Cory Combs, Deputy Director at the Beijing-based consulting firm Trivium China, previously told the Financial Times that light rare earths, such as neodymium and praseodymium, which are widely used in magnets, have not yet become a target of regulation, but could become a potential "important deterrent" for China in case of escalated trade conflicts.
Although China has stated that rare earths have dual civilian and military use, and that export controls on them are an international practice, some people have distorted and exaggerated it into the so-called "weaponization of rare earths." Such rhetoric has become increasingly frequent recently, with multiple overseas companies announcing projects aimed at "reducing dependence on Chinese supply."
However, both Western research institutions and independent analysts have expressed the view that other countries find it difficult to "challenge" China's role in the rare earth supply chain. According to the International Energy Agency (IEA), over 60% of the world's rare earths were mined in China in 2023, and as high as 92% of the rare earths were refined in China.
According to a report by South China Morning Post on the 8th, Earth Rarest, an Australian research institution, believes that Australia has the potential to become the second-largest source of light rare earths after China, supplying 15% to 20% of neodymium and praseodymium globally. However, it also acknowledges that the country cannot "completely replace" China's supply capabilities across all 17 types of rare earth elements.
Vivek Y. Kelkar, an independent analyst from India, also argues that China will continue to dominate the rare earth supply for a long time.
"Attempts to weaken the dominant position have been underway for years, but progress so far is not sufficient to talk about 'ending China's dominance.'"
Kelkar believes that China, which currently holds a dominant share, already has an advantage in pricing power. Few countries have proposed effective, state-led investment strategies for the rare earth industry, which will make China have a "very strong hand" in the foreseeable future, unless global financing can be "effectively guided." However, for the United States, Trump does not seem willing to explicitly propose any financing strategy linked to subsidies.
"The next stage of U.S.-China competition will intensify in the global rare earth mining and supply sectors, especially focusing on Africa and Latin America," said Kelkar. The U.S. is pushing more initiatives in countries like Angola, Rwanda, and Saudi Arabia to diversify the rare earth supply chain.
This article is exclusive to Observers, and without authorization, it cannot be reprinted.
Original: https://www.toutiao.com/article/7526076609452081710/
Statement: This article represents the views of the author. Welcome to express your opinion by clicking on the 【Up/Down】 buttons below.