The World’s Chip Supply Chain Is Bracing for Fallout From China’s Rare-Earth Curbs

Businesses across the global semiconductor supply chain are bracing themselves for disruptions from China’s most targeted move yet to limit their supplies of rare-earth materials, which are critical to building the chips fueling the artificial intelligence boom.

The restrictions may delay shipments for ASML Holding NV, which sells machines that make the world’s most advanced semiconductors, for weeks, a person familiar with the company said. The company is preparing for disruptions, particularly due to a clause that requires foreign firms to seek China’s approval for re-exports of products containing its rare earths, said the person, who asked not to be identified discussing private matters and noted that ASML is lobbying Dutch and US allies for alternatives. The company declined to comment. 

A senior manager at a major US chip company said the firm is still assessing potential impacts. But the clearest risk the company is facing now is an increase in the prices of rare earths-dependent magnets that are critical to the chip supply chain, the person said, asking not to be identified discussing operations. An official at another US chip company said the business is rushing to identify which of its products contain rare earths from China and is worried that the country’s requirement for licenses will grind its supply chain to a halt.

The restrictions represent the first major attempt by Beijing to exercise long-arm jurisdiction over foreign companies to target the semiconductor and AI industries. They require overseas firms to seek approval for shipping any material containing even trace amounts of Chinese rare earths — and explicitly call out parts used to make certain computer chips and advance AI research with military applications. 

Chip-making machines, like those sold by ASML and Applied Materials Inc., are especially dependent on rare earths because they contain extremely precise lasers, magnets and other equipment that use these elements. 

“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.” 

Some have questioned how long the restrictions will last, viewing them as potential posturing ahead of a trip to Asia that US President Donald Trump had planned that was expected to include a meeting with Chinese President Xi Jinping later this month. It’s unclear how China would even track rare earths at such discreet levels to enforce the rules. 

Trump on Friday threatened to call off his meeting with Xi altogether, describing the new rare-earth controls as “hostile” and threatening a “massive increase” of tariffs on goods from China.

“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. “The U.S. has Monopoly positions also, much stronger and more far reaching than China’s. I have just not chosen to use them, there was never a reason for me to do so — UNTIL NOW!”

The world’s biggest chipmakers including Intel Corp., Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. rely on ASML to produce semiconductors. Samsung and Intel declined to comment. TSMC didn’t respond to a request for comment. 

A White House official said the government and relevant agencies are assessing any impact from the new rules, which were announced without notice and imposed in an apparent effort to exert control over the entire world’s technology supply chains.

The US House Select Committee on China panned the Asian nation for the move, describing the restrictions as “an economic declaration of war against the US.” Committee Chairman John Moolenaar, a Republican, said in a statement on Thursday that China has “fired a loaded gun at the American economy.” 

Germany, Europe’s biggest economy, has already introduced measures to diversify its supply of raw materials, and its economic ministry called China’s curbs a “great concern” on Friday. The government said it’s in close contact with affected companies and the European Commission to respond. 

Taiwan relies mainly on Europe, the US and Japan for rare-earth supplies. “We still need further assessment before deciding on the impact on our overall industry,” the nation’s economic affairs ministry said in a statement. “We will continue to monitor indirect impact from fluctuations in the pricing of raw materials and supply chain adjustments.”

With assistance from Josh Wingrove, Kamil Kowalcze, Michael Nienaber, Petra Sorge, Yuki Furukawa, Christina Kyriasoglou, Joe Deaux, Mackenzie Hawkins and Josh Xiao.

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