How China’s control of battery supply chains is becoming a critical risk for U.S. military power and AI initiatives — reducing reliance will take nearly a decade
According to a special report by the New York Times, the U.S. government is concerned about how China sits at the center of that ecosystem, controlling large portions of battery manufacturing and processing.
(Image credit: Tesla)
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When U.S. defense planners talk about supply chain risk, semiconductors usually dominate the conversation. But a quieter dependency is drawing growing attention inside the Pentagon and across the tech industry: batteries. From AI training clusters and hyperscale data centers to drones, satellites, and electric military vehicles, modern computing and warfare now rely on lithium-ion batteries and the materials that enable them.
Three high-level meetings on the battery supply chain are understood to have been held at the White House in recent weeks, and the National Energy Dominance Council, established by President Trump, has been meeting with battery companies. The Energy Department also recently announced up to $500 million for battery materials and recycling projects.
Structural dominance
U.S. dependence on Chinese batteries did not emerge overnight; it is the product of decades of industrial policy, aggressive investment, and vertical integration that have allowed Chinese firms to dominate nearly every stage of the battery supply chain. While the U.S. and allies have focused on downstream innovation and system-level design, China has built scale in mining, refining, cell manufacturing, and component processing. That imbalance is now colliding with surging demand from AI, electrification, and modern defense systems.
Chinese companies control the majority of global processing capacity for lithium, cobalt, nickel, and graphite, materials essential for lithium-ion batteries. Battery-grade graphite processing, for example, is overwhelmingly concentrated in China, and lithium iron phosphate cell manufacturing is similarly dominated by Chinese firms. Even when raw materials are mined elsewhere, they are often shipped to China for refining before entering the global supply chain.
This is significant because processing and component manufacturing are the hardest stages to replicate quickly. Mines can take a decade or more to permit and develop, but refineries, cathode plants, anode facilities, and separator production lines also require years of capital investment and technical expertise. China built these capabilities early, often with state support, and scaled them to a level that made competing facilities elsewhere economically unattractive. Western manufacturers increasingly opted to source components from China rather than to build redundant capacity domestically.
As demand for batteries has increased, driven first by consumer electronics and electric vehicles and now by grid storage and AI infrastructure, it’s apparent that this decision has become a significant liability. Battery packs for data centers, backup power systems, and industrial AI deployments are large, expensive, and complex to substitute. As a result, for many U.S. operators, Chinese suppliers remain the only realistic option at scale.
