Powering The Cloud, Powered By China: The Lithium Dependency Behind Global Data Centers

As digital infrastructure scales, its reliance on Chinese lithium becomes a strategic risk

The world’s digital infrastructure runs on more than code. Beneath the cloud computing platforms and AI systems that define modern commerce, government, and communication lies a growing network of data centres. These facilities are the backbone of the digital economy—warehouses of servers that demand stable, round-the-clock power. And when the grid fails, they turn to lithium.

Increasingly, lithium-ion batteries are the core technology used in uninterruptible power supplies (UPS) and backup energy storage systems. These batteries are preferred for their energy density, compact footprint, and rapid discharge capabilities. But there is a problem: the supply chains that underpin this critical component are alarmingly concentrated in China.

This dependency is beginning to attract the attention of policymakers and cybersecurity analysts, not just as a commercial concern but as a strategic vulnerability. As geopolitical competition intensifies, the question becomes urgent: have we built our digital future on a material foundation that could be used as leverage?

Lithium: The Silent Enabler of the Cloud

Data centres consume an enormous amount of energy—globally estimated at 1–2% of total electricity usage. Much of that demand is continuous, requiring sophisticated systems to maintain uptime. Even momentary power interruptions can result in hardware damage or service outages, with cascading effects across the internet.

To prevent this, data centres are equipped with UPS systems, which kick in instantly if grid power is lost. Increasingly, these systems rely on lithium-ion battery arrays rather than traditional lead-acid setups. Lithium offers superior performance in high-density environments, a key requirement as data centres aim to maximise computing capacity per square metre.

In recent years, hyperscale operators such as Amazon Web Services, Microsoft Azure, and Google Cloud have begun deploying lithium-based battery storage at industrial scale—often in parallel with renewable energy sources. This shift is seen as both a performance upgrade and a step toward sustainability. But it has created a new type of infrastructure dependency, one that most end-users never see.

China’s Grip on the Lithium Supply Chain

While lithium is mined in various countries—Australia, Chile, Argentina—nearly 60% of global refining capacity is based in China. More importantly, over 70% of global lithium-ion battery manufacturing takes place there. Chinese firms dominate every stage of the supply chain, from chemical processing to cathode production to final assembly of battery cells.

This dominance includes much of the UPS market. Leading global suppliers of industrial battery backup systems, including those used in data centres, source a substantial share of their components from Chinese manufacturers. Even when the final product is assembled elsewhere, critical parts—cells, battery management systems, or power electronics—are often made in China or by China-owned firms.

The consequence is that a vital layer of redundancy in the global digital economy is tethered to supply lines that are politically and strategically exposed.

A Strategic Weak Point in Digital Infrastructure

The concern goes far beyond procurement risk. Data centres are critical infrastructure in every advanced economy. They host not only corporate data but also government systems, public health records, financial exchanges, defence communications, and increasingly, artificial intelligence workloads.

If access to lithium-based systems were disrupted—whether through export controls, price manipulation, or geopolitical retaliation—the knock-on effects could be severe. The fragility of the system lies not only in the materials themselves but in the timeframes involved. Battery systems are not instantly replaceable. Diversifying suppliers, qualifying alternatives, and reengineering backup systems takes time—time that may not be available in a crisis.

Moreover, just as Russia’s gas exports were weaponised during the Ukraine conflict, and OPEC’s oil embargo in the 1970s reshaped global geopolitics, lithium now presents a similar risk in digital form. While China has so far used its mineral dominance more subtly, the precedent for resource leverage is well established.

Industry and Government Response

There are signs the industry is aware of the problem, but responses remain uneven. Some large cloud providers have begun reviewing supply chain dependencies, looking for secondary sources of battery components or shifting some procurement to South Korea, Japan, or emerging producers in Europe and North America.

Alternative chemistries, such as sodium-ion or iron-air batteries, are being developed, but they are not yet ready for high-performance UPS applications. Flow batteries, while promising for large-scale storage, remain cost-prohibitive and space-intensive for data centre deployment.

Governments are beginning to take notice. The US Department of Energy and the European Commission have each launched initiatives to build domestic lithium processing capacity and incentivise battery manufacturing. But scaling these capabilities will take years—and China’s lead in refining and cell production is measured not just in volume but in cost efficiency and technological maturity.

A Delicate Balancing Act

The issue facing the data centre sector is not just technical—it is strategic. Operators must balance cost, performance, and availability with resilience and security. In a global market where Chinese supply remains the most economically viable option, there is little short-term incentive to shift away. But the long-term risks are becoming harder to ignore.

Some analysts argue that digital infrastructure planners should treat lithium the way energy planners treat oil or gas: as a critical input that requires diversification, buffering, and in some cases, national stockpiles. Others advocate for more transparent supply chain mapping and scenario planning, particularly for facilities hosting sensitive or public data.

Conclusion: A Digital Dependency Worth Confronting

The lithium-ion battery has quietly become the linchpin of modern digital resilience. As the cloud expands and demand for real-time, always-on computing continues to rise, so too does the importance of stable, secure backup systems. For now, those systems overwhelmingly rely on materials and technologies tied to China.

In a less volatile world, that might be seen as a technicality. In today’s environment, it looks increasingly like a strategic oversight. Ensuring the cloud’s resilience requires looking beneath the software stack—to the metals, minerals, and geopolitical realities that keep it running.

Author: Brett Hurll