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 for disruption from the escalating trade war after China imposed curbs on rare earth mineral exports and the United States imposed additional tariffs and restrictions on software sales to the Asian country.

China’s restrictions, the most targeted move yet to limit supplies of rare earth materials, represent Beijing’s first major attempt to use long-arm jurisdiction over foreign companies to target the semiconductor industry and threaten to halt the chips powering the artificial intelligence boom. These led US President Donald Trump to announce on Friday that he would impose additional 100% tariffs on China and export controls on “any critical software.”

Rare earth restrictions could cause weeks-long delays in shipments from ASML Holding NV, the world’s only maker of the most advanced semiconductors, a person familiar with the company said.

A senior executive at one of the leading US chip companies said the firm was still assessing the potential impacts. But the clearest risk the company now faces is the rise in prices of rare earth-dependent magnets critical to the chip supply chain, said this person, who asked not to be identified discussing operations.

An official at another U.S. chip company said the business was rushing to determine which of its products contained rare earths from China and was concerned that the country’s licensing requirement would bring its supply chain to a halt.

It is unclear which software products from the US would be affected by Trump’s latest proposed export ban. In July, the administration lifted export license requirements for chip design software sales as part of a series of measures implemented in May in response to Beijing’s earlier restrictions on shipments of essential rare earth elements.

China’s new rules require overseas firms to obtain approval to ship any material containing traces of Chinese rare earth elements and clearly identify parts used to make certain computer chips and the development of military applications and artificial intelligence research.

“These are the strictest export controls China has ever implemented,” said Gracelin Baskaran, director of the Center for Strategic and International Studies, focused on critical minerals. “It’s pretty clear that they have the leverage and the power to make not just U.S. companies comply, but companies around the world as well.”

ASML and Applied Materials Inc. Chipmaking machines, such as those sold by , are particularly reliant on rare earths because they include highly sensitive lasers, magnets, and other equipment that use these elements.

A person familiar with ASML, who asked not to be identified discussing private matters, said ASML was bracing for disruptions, particularly over a clause requiring foreign companies to obtain Chinese approval for re-exports of products containing rare earth elements, and noted that ASML was lobbying its Dutch and U.S. allies for alternatives. The company declined to comment.

“Within the semiconductor value chain, China’s new export controls will likely hit the hardest chip manufacturers that use rare earth-based chemicals in the chip manufacturing process and tool manufacturers that integrate rare earth magnets into their equipment,” said Jacob Feldgoise, senior data research analyst at Georgetown University’s Center for Security and Emerging Technology.

Some have questioned how long the restrictions will last, seeing them as a potential stoppage ahead of Trump’s trip to Asia later this month, which is expected to include a meeting with Chinese President Xi Jinping. It’s not even clear how China will track rare earths at such discrete levels to enforce the rules.

However, China’s move escalated tensions with the United States. The tariffs announced by Trump will increase import duties on many Chinese products to 130% starting next month. That would be slightly below the 145% level imposed earlier this year, before both countries cut tariffs in a truce to advance trade talks. On Friday, Trump also threatened to cancel his meeting with Xi altogether, describing the new rare earth controls as a “hostile” action.

“I always felt they were lurking, and now, as always, I’m proven right! There is no way China is allowed to hold the world ‘captive,'” Trump said in a post on Truth Social.

This isn’t the first time rare earths have come to the center of US-China trade wars. After Trump increased tariffs on Chinese imports earlier this year, the Chinese government responded by cutting mineral exports to U.S. companies. Officials from both sides had agreed to a ceasefire in the spring; Accordingly, Trump lowered taxes and Xi’s officials agreed to restart the mineral flow.

Intel Corp., Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. The world’s largest chip manufacturers, including, rely on ASML to produce semiconductors. Samsung and Intel declined to comment. TSMC did not respond to a request for comment.

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

The US House of Representatives China Committee criticized the Asian nation for the move, describing the restrictions as “an economic declaration of war against the United States”. Republican Committee Chairman John Moolenaar said Thursday that China is “firing a loaded gun at the American economy.”

Germany, Europe’s largest economy, has already introduced measures to diversify its supply of raw materials, and its economy ministry on Friday described China’s restrictions as “major concern”. The government said it was in close contact with the affected companies and the European Commission.

Taiwan relies mostly on Europe, the United States and Japan for its rare earth supplies. “We need further evaluation before deciding on the impact on the chip industry,” the country’s economic affairs ministry said in a statement. “We will continue to monitor the indirect impact of fluctuations in raw material prices and supply chain regulations.”

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

This article was generated from an automated news agency feed without modifications to the text.