The World’s Chip Supply Chain Is Bracing for Fallout From China’s Rare-Earth Curbs
Key Takeaways
- China’s new rare-earth export controls require foreign firms to seek approval for re-exports
- ASML faces potential shipment delays of weeks for advanced chip-making machines
- US chip companies warn of price increases and supply chain disruptions
- Global tech supply chains face unprecedented jurisdictional reach from Beijing
Global semiconductor businesses are preparing for major disruptions as China implements its most targeted restrictions yet on rare-earth materials – essential components for AI chips. The new rules require foreign companies to obtain Chinese approval for re-exports of products containing even trace amounts of Chinese rare earths.
Immediate Industry Impact
ASML Holding NV, which produces the world’s most advanced semiconductor manufacturing equipment, could face shipment delays of several weeks. The company is particularly concerned about the re-export approval clause and is lobbying Dutch and US allies for alternatives.
Major US chip companies are assessing potential impacts, with one senior manager identifying rare earths-dependent magnet price increases as the clearest immediate risk. Another US chip firm official expressed concerns that license requirements could “grind its supply chain to a halt” as they rush to identify which products contain Chinese rare earths.
Unprecedented Export Controls
The restrictions represent Beijing’s first major attempt to exercise long-arm jurisdiction over foreign companies specifically targeting semiconductor and AI industries. The rules explicitly cover parts used for computer chips and military AI research applications.
Chip-making equipment from companies like ASML and Applied Materials Inc. heavily depends on rare earths for precision lasers, magnets, and other critical components.
“These are the strictest export controls that China has utilized,” said Gracelin Baskaran, a critical minerals-focused director at the Center for Strategic and International Studies. “It’s quite clear that they have the sticks and the leverage to make, not just US firms, but firms worldwide comply.”
Global Political Reactions
The timing of the restrictions has raised questions, with some viewing them as posturing ahead of a planned meeting between US President Donald Trump and Chinese President Xi Jinping. Trump responded by threatening to cancel the meeting altogether, calling the controls “hostile” and warning of “massive increase” in tariffs on Chinese goods.
“I have always felt that they’ve been lying in wait, and now, as usual, I have been proven right! There is no way that China should be allowed to hold the World ‘captive,'” Trump said in a post on Truth Social.
Industry and Government Responses
Major chipmakers including Intel, TSMC, and Samsung rely on ASML for semiconductor production equipment. The White House confirmed that relevant agencies are assessing the impact of the new rules, which were announced without notice.
The US House Select Committee on China described the restrictions as “an economic declaration of war against the US,” with Chairman John Moolenaar stating China had “fired a loaded gun at the American economy.”
Germany, which has already taken measures to diversify raw material supplies, expressed “great concern” about the curbs. Taiwan’s economic affairs ministry stated they need further assessment before determining the impact on their industry but will monitor price fluctuations and supply chain adjustments.
