[News] China’s Toughest Rare-Earth Rules Hit Global Chip Supply: TSMC, ASML, Samsung on Alert

Right before TSMC’s earnings call this week, the U.S.-China chip war flared up again. On October 9, Beijing tightened rare-earth export rules, requiring case-by-case reviews for semiconductors and AI. According to China’s Ministry of Commerce, the rules cover 14nm-and-below logic chips, 256-layer-and-up memory, related equipment, and AI with potential military use. Any foreign-made item with ≥0.1% Chinese-origin rare earths—including samarium-cobalt, neodymium-iron-boron, cerium magnets, and rare earth alloys—now needs a license.

The potential impact could be massive. Here’s a quick look at how foundries, memory makers, and chipmaking tool giants—TSMC, Samsung, and ASML—might be affected, according to Commercial Times, South China Morning Post, and Tom’s Hardware.

Foundries Confront Equipment, Material Uncertainties

Commercial Times suggests that foundries regard the current curbs have limited immediate impact, but much will depend on how the supply chain adjusts. Analysts cited by the report expect restricted materials to become increasingly scarce and expensive, while longer delivery times for equipment and components could affect long-term production plans.

It is worth noting that as per Bloomberg, the new curbs may affect two groups — chipmakers using rare-earth chemicals in wafer fabrication and equipment manufacturers relying on rare-earth magnets.

The Commercial Times report further notes that China’s new curbs could delay EUV system deliveries. Industry insiders cited by the report indicate that the nanometer-level precision of lithography systems relies on rare-earth permanent magnets used in brushless DC motors and magnetic levitation systems.

On the other hand, rare earths are also essential in ion implantation and CMP (chemical mechanical polishing) processes. Equipment makers cited by Commercial Times explained that for instance, cerium oxide (CeO₂) used in CMP slurries to enhance polishing efficiency would be difficult to replace if cerium is added to export restrictions.

The South China Morning Post takes a cautious view, noting that an analyst says TSMC still relies on China for roughly 30% of the consumables used in its 7nm-and-below chip production.

As highlighted by Commercial Times, TSMC, in its filings, has listed potential short- or long-term inability to procure key chemicals or materials as an operational risk under such export constraints.

Chipmaking Tools Brace for Rare-Earth Ripple

As highlighted by Bloomberg and Tom’s Hardware, semiconductor equipment makers like ASML are also likely to feel the impact. ASML, which effectively monopolizes advanced lithography systems for chip production, depends on Chinese-origin rare earths for key components.

According to Bloomberg, the company’s shipments could face delays of several weeks due to new import restrictions. Commercial Times adds that ASML is already preparing for potential supply disruptions, coordinating with allies in the Netherlands and the U.S. to explore alternative solutions.

Memory & Storage Take a Hit

The new export curbs could also affect the memory and storage sector, especially NAND-based products and HDDs. Tom’s Hardware notes that hard drives rely on voice-coil actuators and spindle motors powered by specialized magnets, which require heavy rare-earth elements to maintain their strength under high temperatures. As China tightens its export restrictions, component suppliers are likely to feel the pressure, the report notes.

TrendForce adds that the new rules could directly impact HDD production for Seagate and WDC, as their spindle motors depend on these critical materials.

In addition, the South China Morning Post cites Samsung’s ninth-generation V-NAND as a key product likely to be affected, with production delays of one to two quarters. The report also notes that Samsung recently sourced sputtering target materials from China for its 300-layer V-NAND, indicating the company may need to restructure its supply chain.

Read more

• [News] China Expands Rare Earth Curbs, Subjects 14nm Logic and 256-Layer Memory to Case-by-Case Review
• [News] U.S. Lawmakers Say China Bought Nearly $40B in Chipmaking Gear Despite Export Curbs

(Photo credit: TSMC)