In its most basic form, the tale of how China came to control the world’s battery supply chain is about an American scientist and a bankrupt American business. Lithium iron phosphate battery chemistry was developed by John Goodenough, who would go on to win the Nobel Prize in Chemistry. This technology powers almost all BYD vehicles and, via BYD, a sizable amount of the world’s electric transportation. An American company commercialized its LFP battery. That business failed. The intellectual property was purchased by a Chinese business. The technology never returned after crossing the Pacific. China now controls between 75 and 80 percent of the world’s production of lithium-ion batteries and has a much stronger hold on the upstream materials that enable those batteries, thanks to a methodical, state-backed accumulation of capacity, supply chains, mineral rights, and industrial expertise over the course of the following 20 years.
China’s upstream position is represented by numbers that don’t get better with familiarity. Between 90 and 95 percent of the world’s battery-grade graphite is processed in China. Over half of the world’s cobalt and lithium are refined there. Ninety percent of rare earth processing and sixty percent of rare earth mining are under its control. It has made investments in over 20 lithium mines, mostly in Latin America and Africa, ensuring future supply in areas where Western governments have been mainly absent. About 37% of the global EV battery market is held by CATL, the biggest battery manufacturer in China, and another 16% is held by BYD. More than half of the components used in battery packs for electric vehicles sold worldwide are under the joint control of two Chinese businesses. Additionally, it should be mentioned that CATL received about $391 million in state subsidies in a single six-month period. This amount puts CATL in a position to maintain pricing that its Western rivals, who operate without comparable support, find difficult to match.
| Topic | China’s Battery Monopoly: A Strategic Advantage the West Can’t Ignore |
| Production Dominance | China produces approximately 75–80% of all lithium-ion batteries globally. CATL alone holds ~37% of the global EV battery market; BYD ~16% — combined 53%. China manufactures 85% of the world’s lithium-based anodes and 70% of cathodes. Even batteries made in Japan and South Korea depend on Chinese components and minerals |
| Upstream Mineral Control | China controls 90–95% of battery-grade graphite processing globally. Over 50% of lithium and cobalt refining. 60% of rare earth mining, 90% of rare earth processing. China has invested in 20+ lithium mines concentrated in Africa and Latin America. 90% of samarium (used in military applications, including missiles and fighter jets) |
| State Subsidies | CATL received approximately $391 million in state subsidies in a single six-month period. Subsidies allow Chinese manufacturers to sustain below-cost pricing that drives out competitors. Chinese analysts projected 2025 Chinese EV manufacturing capacity at twice the entire global demand from the prior year |
| The IP Acquisition Story | John Goodenough (American Nobel laureate) invented lithium iron phosphate (LFP) battery chemistry — now the dominant technology in Chinese EVs including all BYD vehicles. An American company that commercialized LFP went bankrupt; a Chinese company acquired the intellectual property. This pattern of acquiring Western IP during corporate distress has recurred across the sector |
| Reference | Foundation for Defense of Democracies — Unplugging Beijing: A Playbook to Reclaim America’s Advanced Battery Supply Chains (fdd.org) |
Western reliance on Chinese battery materials is more risky than Europe’s reliance on Russian gas before 2022, according to Dr. Tobias Gherke of the European Council on Foreign Relations. Because European governments still recall what happened in 2022 when that dependence became a vulnerability—factories curtailed production, energy bills tripled, and governments scrambled for alternatives that weren’t there—that comparison gained significant traction in the energy policy community. It took a geopolitical shock to reveal Europe’s decades-long reliance on gas. Battery reliance is increasing similarly, and the possible shock—a Chinese decision to limit graphite exports, a prohibition on the transfer of battery processing technology, or an intensification of trade disputes—is real. All of these levers have already been demonstrated by China. In 2023, it placed limitations on graphite. It has suggested more extensive prohibitions on battery and lithium processing technologies. According to reports, it has threatened to impose sanctions on South Korea for thinking about selling vital minerals to the US. In its 2025 report “Unplugging Beijing,” the Foundation for Defense of Democracies detailed instances of Chinese espionage that particularly targeted Tesla and Phillips 66 battery technology. These are records of past actions, not alerts to potential hazards.
The fact that China’s dominance was established through a variety of strategies that are challenging to counter without cooperation and time makes this especially challenging for Western policymakers. Some of it is legitimate industrial policy, carried out with long planning horizons and steady investment that is difficult for Western democracies, whose governments change every few years, to imitate. A portion of it is caused by subsidized overproduction, which lowers global prices below the point at which rival projects can be funded. This type of economic pressure acts as a barrier to entry even in the absence of clear trade restrictions. The strategic acquisition of mining rights, processing capacity, and intellectual property in countries where Western governments were not paying attention accounts for a portion of it. The positions were set by the time the attention came. According to experts, it will take five to ten years for Western governments and businesses to develop significant alternatives. However, this estimate is predicated on a level of ongoing political commitment and investment that has not yet fully materialized.
The similarities to the semiconductor story are difficult to ignore. Despite the concentration of manufacturing capacity in Taiwan and East Asia, American policymakers believed for decades that dominance in chip design provided adequate protection. The US passed the CHIPS Act and started attempting to reshore capacity in emergency mode as tensions increased and the Taiwan issue became more pressing. The battery condition is in an earlier phase of the same arc. It is obvious how dependent it is. There is documentation of the strategic risk. The audit of the supply chain is complete. What’s left is the politically and economically challenging task of actually constructing alternatives, such as mining projects that require years to obtain permits, processing facilities that need ongoing subsidies to compete with Chinese pricing, and manufacturing capacity that requires long-term contracts and anchor customers before anyone will finance construction.
The aspect of national security is not incidental. Advanced batteries are critical to thousands of military systems, including unmanned submersibles and handheld radios, according to former Deputy Secretary of Defense Kathleen Hicks. Ninety percent of the small drones used by the US military are manufactured in China, according to Marc Andreessen. The Chinese battery manufacturer threatened to impose sanctions on the entire US supply chain when the US attempted to establish a rival drone company. This is the leverage that results from monopoly control: the capacity to jeopardize the operational capability of rival militaries during a time of increased tension, in addition to commercial pricing power. A clear illustration of the significance of battery-powered systems in contemporary warfare was given by the Russia-Ukraine conflict, which has consumed an estimated 50,000 battery-dependent attack drones each month. Western armies are closely examining that conflict. Shenzhen is a part of their battery supply chains.
Expanded Development Finance Corporation mandates, coordinated allied purchasing, special economic zones that co-locate mining and processing, and a critical minerals exchange supported by physical stockpiles are all reasonable solutions to this problem. The real question is whether they will be carried out on a large enough scale and with enough urgency. China built what it has over the course of thirty years of steady investment. In ten years, the West is now attempting to replicate significant aspects of it while upholding democratic procedures, environmental review requirements, and profitability standards that did not apply to China’s state-directed model. The gap might close. Another possibility is that the effort is too thin and too late to alter the underlying dynamic. This is one of the more important industrial policy issues of the decade because of this uncertainty.
