If you’ve been following the slow-motion strategic panic over critical minerals, you know that Japan, Australia, the US, Canada, Europe and others are busy talking about China’s dominance both of rare earth mining and refining and of the production of rare earth magnets. Those countries are even starting to do something about it.
What has been left out of reports on the subject, until recently, is how and with whose equipment rare earth magnets are made. Then, on May 1, Nikkei Asia reported that “Ulvac will soon move production of equipment that makes rare-earth magnets back to Japan from China.”
But that was misleading. On May 7, the company itself issued a press release:
ULVAC Establishes Japan-Based Production for Rare-Earth Magnet Vacuum Melting Furnaces —Orders Expected to Approximately Triple Year on Year, Driven Primarily by Demand in Europe and North America—
ULVAC, Inc. anticipates that orders for its continuous vacuum melting furnaces dedicated to rare-earth magnets will approximately triple year on year, driven primarily by magnet manufacturers in Europe and North America. In response to this growth in orders, ULVAC has decided to establish a new production system for these furnaces in Japan. By adding a production site in Japan to its existing facility in China, ULVAC will build a dual-site supply structure, providing customers with diversified supply options.
ULVAC has about 70% of the global market for vacuum melting furnaces used in the production of rare earth magnets. At present, all of its furnaces are made by a subsidiary in China and most of them are sold there. After the new factory starts operations in September, production in Japan will be ramped up until it accounts for about 15% of the total by 2030.
At least that’s how management sees it now. Obviously, the figure could rise if necessary. But the idea is to meet the requirements of non-Chinese customers, not to break ties with China.
The melting furnace is key to the rare earth manufacturing process. It melts and casts the rare earth alloy, creating a microstructure that determines the final performance of the magnet. Other ULVAC furnaces are used in subsequent stages of the magnetic material preparation process, including hydrogen decrepitation (which produces very fine grains of material), sintering and aging.
ULVAC (derived from “Ultimate in Vacuum”) is a medium-sized Japanese manufacturer headquartered in Chigasaki, Kanagawa Prefecture, west of Tokyo – where the new factory will be situated. Based on vacuum technology developed since its establishment in 1952, ULVAC manufactures production equipment, components, analytical instruments and materials for makers of semiconductors, other electronic and optical devices, displays, EV batteries and industrial equpment.
In addition to rare earth magnets, ULVAC’s industrial equipment is used in the auto, pharmaceutical, food and other industries. For the semiconductor industry, the company produces MHM (Metal Hard Mask) deposition systems used by makers of advanced logic ICs, as well as deposition and other equipment for makers of high-bandwidth memory, NAND flash memory, power devices and IC packaging. OLED display production equipment is another ULVAC speciality.
ULVAC is not a defense contractor, but its products are used to make any number of things that can be classed as dual-use. It is, therefore, an important part of Japan’s CMI (civilian military integration) value chain.
ULVAC’s annual sales currently amount to about ¥260 billion ($1.64 billion at the current exchange rate). Its regional sales breakdown is roughly Japan 30%, China 35%, South Korea 13%, Taiwan 12% and Europe and other regions 10%.
Beginning with an office in Beijing in 1983, ULVAC has established nearly a dozen joint ventures and subsidiaries in China, including a vacuum furnace production and sales company in Shenyang. It was therefore well positioned when China set about taking over the rare earth extraction, processing and magnet manufacturing industry in the 1990s.
As alarmed politicians, strategic consultants and journalists never tire of telling us, China commands about 70% of global rare earth extraction and more than 90% of rare earth processing and magnet production. This makes China an essential supplier to makers of defense equipment, electric vehicles, industrial motors, wind turbines, consumer electronics and medical devices.
Rare earth magnets are used throughout the defense industry, in fighter jets, missiles, drones, other weapons systems, sensors and communications equipment. Specific components incorporating rare earth magnets include motors, actuators and generators, and guidance, radar, sonar and laser-related systems.
This should not surprise anyone. Twenty-two years ago, in May 2004, James B. Hedrick of the US Geological Survey made a presentation entitled “Rare Earths in Selected U.S. Defense Applications” at the “40th Forum on the Geology of Industrial Minerals” held in Bloomington, Indiana.
Hedrick noted that REEs (rare earth elements) are indispensible to US military technology, including:
- Missiles – Tomahawk missiles, Joint Direct Attack Munitions (JDAMs), precision-guided weapons
- Radar Systems – Used in F-35 stealth fighters and advanced aircraft
- Unmanned Aerial Vehicles (UAVs) – Predator drones and next-gen surveillance technology
- Naval Warfare – Virginia-class submarines, Arleigh Burke destroyers, and sonar systems
- Jet Engines – Fighter jets like the F-16 depend on rare-earth magnets
- High-Powered Lasers – Advanced weaponry and targeting systems
- Night Vision & Communications – Essential for battlefield operations and secure communications
How was something so important allowed to fall into the hands of a rival that our dear leaders never tire of berating, sanctioning and warning against? The polite way to put it is that the US and its allies were asleep at the wheel.
ULVAC expects orders for vacuum melting furnaces to triple to about ¥20 billion this fiscal year (6.5% of total orders guidance for the fiscal year to June 2026), but this is likely to be only the initial take-off. Over the next 5 – 10 years, orders and sales could increase by several times as demand from user industries continues to grow and Japan, the US, Europe and other countries seek to establish rare earth magnet supply chains with less, even zero, Chinese participation.
The 30% of the vacuum melting furnace market not supplied by ULVAC is divided among several American, European, Chinese, Indian and other Japanese companies. Of these, the most prominent are Consarc in the US, Italian company TAV and, in China, IKS PVD Technology (Shenyang) and Sinoran Mining & Metallurgy Equipment, which is headquartered in Changsha, capital of Hunan province.
As noted on its website, Sinoran has business relationships with American, Canadian, British, Iranian and Chilean mining enterprises, and has set up offices in Australia, Turkey, Canada and Iran.
As the rare earth magnet market expands internationally and new entrants appear, demand is shifting from stand-alone equipment to complete production lines and comprehensive technical support. This plays to ULVAC’s extensive product line and long experience, but the Japanese company will have to fight to keep its lead in this market.
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