TSMC(US:TSM) Sou Hu Cai Jing·2025-10-24 07:50Core Viewpoint - The recent expansion of China's rare earth export controls poses significant challenges for Taiwan's semiconductor industry, particularly for TSMC, which heavily relies on these materials for advanced chip manufacturing [1][3][5]. Group 1: Impact of Rare Earth Export Controls - China's new regulations require most semiconductor manufacturers to obtain export licenses to sell products globally, affecting all foreign organizations and individuals [5][20]. - The new rules specifically target five additional rare earth metals and extend to the production of chips below 14nm, which are critical for advanced semiconductor processes [3][5]. - TSMC's rare earth inventory is reported to last only 30 days, and without timely approvals, its advanced production capacity could drop by 40% within three months, risking supply chains for major clients like Apple and Nvidia [7][18]. Group 2: TSMC's Operational Challenges - TSMC faces rising costs and cultural conflicts at its U.S. factories, which complicate its expansion plans despite significant investments [11][13]. - The company has shifted its strategic focus towards the U.S., with plans to establish 30% of its 2nm and more advanced chip capacity there, indicating a potential shift in control and technology from Taiwan to the U.S. [13][15]. - TSMC's investment in U.S. facilities has escalated from an initial $25 billion to $65 billion, with discussions of further increasing it to $165 billion, highlighting a significant resource allocation shift [11][15]. Group 3: Global Supply Chain Repercussions - The rare earth export controls have triggered a global supply chain crisis, affecting various industries, including automotive and defense, with companies like Tesla and Lockheed Martin facing production delays [16][18]. - The U.S. Department of Defense is particularly vulnerable, with a significant portion of its weapon systems relying on Chinese rare earths, indicating a broader national security concern [24]. - China's dominance in rare earth production and processing, controlling 70% of global mining and 90% of refining capacity, positions it as a critical player in the global technology landscape [18][22].