The U.S. semiconductor industry is facing a threat from China's decision to tighten controls on rare earth metals exports. According to The New York Times, Beijing plans to introduce licensing for foreign companies that use such metals in production, which could directly affect the activities of Taiwan Semiconductor Manufacturing Company (TSMC) and other major chip manufacturers.
China, which supplies about 90 percent of the world's rare earths, is looking to restrict access to them by expanding export licensing requirements for finished products. This means that companies that make most modern chips, including TSMC, SK hynix and Samsung, could be forced to obtain Beijing's approval to sell their products internationally. The new rules would effectively give China control over the supply of advanced semiconductors to the United States, posing risks to its domestic supply chain.
The restrictions are set to take effect on November 8. While Beijing previously focused on preventing the use of its minerals in US military technology, the emphasis is now shifting to the development of the US artificial intelligence industry, which is critically dependent on chips.
Rare earth elements are also crucial for chip-making equipment, particularly in polishing and lithography processes. While TSMC has a diverse supply base, a significant portion of the metals come from China. This creates additional challenges not only for the Taiwanese manufacturer but also for its equipment suppliers, such as ASML and Tokyo Electron.
Because of all these restrictions, chip production for leading American companies such as NVIDIA, AMD, and Apple, which are heavily dependent on TSMC, will be threatened.
Thus, Beijing's tightening of control over the export of rare earth metals could cause large-scale disruptions to the global semiconductor supply chain and call into question the stability of the development of the artificial intelligence industry in the United States.