The US faces a massive uncertainity with its chip industry under China's newest rare earth export control measures, and they could potentially force TSMC not to sell its chips to American companies.
Beijing Is Moving Towards Introducing an Export License For Foreign Entities If They Are Reliant on Chinese Rare Earth Materials
[Update]: Taiwan's economy ministry has clarified (via Reuters) that local chip firms, such as TSMC, will not be affected by China's latest export control measures, as the rare earths used in semiconductors aren't included for now. This is a sigh of relief for the AI supply chain, at least until the export controls aren't broadened.
The US-China trade dispute has taken a massive turn in the past few days, especially after the announcement by Beijing that it will be ramping up the export controls on 'rare earths', adding extra scrutiny towards semiconductor firms like TSMC. As the world's largest producer of rare earths, accounting for 90% of total production, China is now moving towards restricting access by introducing licensing policies for end products made from the nation's materials.
This could prove to be massive trouble for firms like TSMC, SK hynix, and Samsung, as semiconductors utilize rare earths as a key component in their production. Based on the report by the New York Times, China's additional curbs on the export of rare earth materials could potentially force TSMC and others to get export licenses to sell their chips to the rest of the world, and this means that Beijing can stop the flow of cutting-edge semiconductors to America, along with disrupting the domestic supply chain.
The new rules would require businesses that make most chips to get an export license to sell them anywhere in the world. That means they could apply to companies like Taiwan Semiconductor Manufacturing Company, which makes most of the world’s advanced logic chips, and SK Hynix and Samsung, the South Korean makers of memory chips.
- NYT
The new restrictions are set to take effect by November 8, and more importantly, China's stance appears to have shifted from preventing the use of the nation's materials in military technologies to now influencing America's AI industry. Rare earth materials play a crucial role in chip fabrication equipment, particularly in polishing and lithography. TSMC has a diverse chain of sourcing rare earths; however, many of them are ultimately sourced from Chinese suppliers. Not just this, but China's export controls also put entities like ASML and Tokyo Electron under jeopardy, creating difficulties for the Taiwan giant to scale up production.
Given that TSMC comes under the influence of Chinese export restrictions, the entire supply chain will be affected, which will impact companies such as NVIDIA, AMD, and Apple, since they rely heavily on the Taiwan giant. The ramped-up export control of rare earths raises serious concerns about the stability of the AI supply chain, and it could prove to bring massive troubles for chip suppliers, as well as their customers.
About the author: Muhammad Zuhair is a hardware and technology reporter for Wccftech, specializing in the semiconductor industry and the complex interplay between technology, manufacturing, and geopolitics. His coverage focuses on the corporate strategies and technological roadmaps of industry giants like TSMC, NVIDIA, Samsung, and Intel. Zuhair's expertise lies in deconstructing complex topics such as fabrication nodes (e.g., 2nm process), the economic impact of policies like the CHIPS Act, and the strategic development of AI infrastructure from NVIDIA, AMD and Intel.
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