The world’s chip supply chain is bracing for fallout from China’s rare-earth curbs

Core Viewpoint - The global semiconductor supply chain is facing significant disruptions due to escalating trade tensions between the US and China, particularly following China's restrictions on rare-earth mineral exports and the US's response with tariffs and software sales restrictions [1][2]. Semiconductor Industry Impact - China's restrictions on rare-earth materials are aimed at limiting supplies to the semiconductor industry, which could hinder the production of advanced chips essential for AI technologies [2][6]. - The new rules require foreign companies to seek approval for shipping materials containing even trace amounts of Chinese rare earths, affecting components used in computer chips and AI research [6][9]. - Major US chip companies are assessing the impact of these restrictions, with concerns about rising prices for rare earth-dependent magnets critical to the chip supply chain [3][4]. Company-Specific Responses - ASML Holding NV, the sole manufacturer of machines for advanced semiconductor production, is preparing for potential shipment delays due to the new export controls [2][8]. - Other US chip companies are identifying products that contain rare earths from China and are worried about the licensing requirements potentially halting their supply chains [4][9]. Trade Relations and Political Context - The US government is evaluating the implications of China's export controls, which have been described as an "economic declaration of war" against the US by the House Select Committee on China [15]. - President Trump's announcement of a 100% tariff on Chinese goods and export controls on critical software is a direct response to China's actions, escalating tensions further [2][11]. - The situation is viewed as a continuation of the trade war, with previous agreements between the US and China having been undermined by these recent developments [13][14]. Global Reactions - Germany has expressed concerns over China's curbs and is taking measures to diversify its supply of raw materials [15]. - Taiwan is monitoring the situation closely, assessing the indirect impacts on its chip industry due to fluctuations in raw material pricing and supply chain adjustments [16].