Beijing has announced that it will introduce an export licensing regime for foreign entities dependent on Chinese rare earth materials, giving it the power to throttle chip exports at will. As the world’s top producer of rare earths, responsible for 90 per cent of total output, China’s move effectively hands it control of one of the most strategic chokepoints in modern technology.
The move appears to be in response to US President Donald Trump's moves to put 100 per cent tarriffs on China minutes after he failed to win the Nobel Peace Prize.
An update from Taiwan’s economy ministry via Reuters briefly soothed nerves, clarifying that local chipmakers such as TSMC are not immediately affected since the current restrictions do not include the rare earths used in semiconductors. That reprieve, however, may prove temporary if Beijing broadens its definition of restricted materials.
According to The New York Times, the new rules could require chip firms to obtain export licences before selling products worldwide.
This would include the Taiwan Semiconductor Manufacturing Company, which produces the lion’s share of advanced logic chips, and South Korean memory makers SK hynix and Samsung.
If Beijing enforces those licensing requirements, it could effectively halt the flow of cutting-edge semiconductors to the United States, crippling domestic supply chains for AI and defence applications alike.
The restrictions, which come into force on 8 November, appear to signal a shift in China’s approach from blocking military-related exports to actively targeting America’s booming AI and semiconductor industries.
Rare earth elements are critical in semiconductor production, used in chip fabrication, polishing, and lithography. Even though TSMC sources materials from a range of suppliers, many trace back to Chinese refiners.
That creates a serious vulnerability for the chip ecosystem, particularly for firms dependent on TSMC’s output, including Nvidia, AMD, and the Fruity Cargo Cult Apple.
The export clampdown could also hit key equipment suppliers such as ASML and Tokyo Electron, both of which provide vital lithography machinery to TSMC. Any disruption in their access to rare earth materials would further snarl chip production just as global demand for AI accelerators is exploding.
Japan’s Rapidus project is pushing hard to achieve mass production of 2nm chips by 2027 in an effort to reduce reliance on TSMC and Samsung, but such diversification will take years to bear fruit.
In the meantime, China’s latest manoeuvre is a blunt reminder that whoever controls the minerals controls the machines, and right now, Beijing has the upper hand.
If the restrictions expand, America’s semiconductor dominance could find itself throttled at the source, leaving Washington’s AI ambitions running on fumes.