• • • DATACENTREMANAGEMENT • • •
It produces 90 per cent of the world’s rare earth magnets that are widely used in electronics. When it comes to semiconductors, China produces 98 per cent of the global gallium supply and 83 per cent of the world’s germanium, both critical rare earth elements used in chip manufacturing. The US lacks significant domestic rare earth
processing capacity. The Mountain Pass Mine in California, the only active domestic rare earth mine, used to ship minerals to China for processing the raw ores, but has been working to boost its US processing capabilities. Building up rare earth supply chains outside of China is along-term endeavour, one that will take 10 to 15 years. If China continues to restrict rare earth
exports, it will have a profound effect once private stockpiles run out. It will likely disrupt manufacturing in technology and other key sectors, leading to further price increases on AI hardware, production slowdowns and supply shortages.
Challenges for the future AI relies on large, scalable data centres to process immense volumes of data, demanding cutting-edge servers, cooling systems and power equipment. With tariffs on critical materials like steel, aluminium and electrical components driving up costs, this will significantly impact capital expenditures (CapEx) and project timelines. For instance, the $500 billion Stargate mega-data centre project has reportedly been stalled due to escalating costs linked to trade
barriers. With tariffs on imported components, delays are becoming more frequent, forcing companies to reevaluate or pause major initiatives. This trend not only threatens the AI sector but also poses broader risks to technological innovation in cloud computing and other fields reliant on data centres. Internationally, these challenges could reshape
global investment patterns. Although the U.S., China and the EU are projected to account for 80 per cent of data centre demand through 2030, the current instability may prompt investors to seek opportunities in more predictable regions impacted less by trade wars. It may lead to an increase in data centre buildouts by smaller cloud computing companies outside the US as businesses look for alternatives to US-based hyperscalers.
Building a resilient industry To navigate the challenges posed by trade wars and tariffs, the data centre industry needs to focus on establishing a resilient supply chain and strategic growth. Despite Microsoft having cancelled data centre projects in the US and Europe in the past few months, the demand for data centres computing is continuing to grow rapidly. Boston Consulting Group estimates global computing power demand to grow 16 per cent on a compound annual basis through 2028. Open Compute Project (OCP) is leading the way
in promoting open standards and sharing innovations. This fosters a decentralised supply
chain where multiple vendors across different regions can manufacture hardware that meet OCP standards, preventing vendor lock-in and driving interoperability. At the same time, sourcing materials like steel
and aluminium domestically can be more reliable even if the raw material prices are higher and save money on logistics and project delays. Reshoring critical manufacturing will take a
decade or longer, but a long-term commitment will enable the global supply chain to become robust and not reliant on one country or region. The shifting nature of tariffs, as seen in ongoing
trade talks between the US, Canada and Mexico, highlights the need for flexibility and careful long-term planning. Given the lengthy approval process for new data centres, businesses must remain adaptable to manage changes in economic conditions and trade policies. Investments in strategic stockpiles of REEs and other critical components is now essential until a diversified global supply chain for REEs exists. The ripple effects of trade wars and tariffs have exposed the fragility of global supply chains, posing serious challenges to the data centre industry. However, these disruptions also present an opportunity to implement long-overdue changes. By diversifying supply sources, prioritising strategic stockpiles, embracing open standards and investing in domestic capabilities, the industry can build a more resilient foundation. One that not only withstands global shocks but also drives the next era of innovation.
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electricalengineeringmagazine.co.uk ELECTRICAL ENGINEERING • JUNE 2025 11
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