Core Insights - The Chinese Ministry of Commerce has implemented export controls on foreign items and related technologies containing Chinese mineral components, effective from October 9, 2025, under the principle of "long-arm jurisdiction" [1][3]. Policy and Regulations - The export control applies to products containing 0.1% or more of Chinese heavy mineral components or utilizing Chinese mineral technology, requiring approval from Chinese authorities [3]. - Export applications for military users or those related to the development of weapons of mass destruction will be directly rejected [3]. Impact on Semiconductor Industry - China holds a dominant position in the mineral sector, with 37% of global mineral reserves and over 70% of the refining and separation processes, particularly controlling 87% of the global smelting capacity for high-purity heavy minerals used in lithography machines [5]. - ASML is facing an unprecedented supply chain crisis due to the new regulations, with internal assessments indicating a potential 30% decrease in EUV lithography machine capacity if mineral supply disruptions continue [5][7]. - The delivery cycle for each EUV lithography machine is expected to extend from 24 months to 36 months, impacting major semiconductor manufacturers like TSMC, Samsung, and Intel, which are in critical phases of building next-generation chip factories [7]. Defense Industry Consequences - The U.S. defense industry is also affected, with Lockheed Martin's F-35 radar sensitivity declining by 23% due to a lack of neodymium magnets, and Boeing's MQ-25 drone project facing risks due to shortages of mineral permanent magnet motors [9]. - A significant 78% of guided systems in existing U.S. weapon stockpiles are reported to be facing mineral supply crises [9]. Global Supply Chain Repercussions - The export controls have led to a 60% reduction in global EUV lithography mirror coating capacity, with China being the sole producer of high-purity gadolinium gallium garnet crystals necessary for precise temperature control in lithography machines [11]. - Companies attempting to bypass Chinese minerals face challenges, with alternative materials resulting in a 40% cost increase and a 30% performance decline [9]. Strategic Responses - The Chinese semiconductor industry is exploring unique strategies to overcome external technology blockades, such as the "non-lithography compensation" strategy proposed by New Kai Lai, which aims to optimize DUV lithography processes to achieve EUV-like precision [11][13]. - Domestic development of EUV photoresists and auxiliary materials has seen significant progress, with over 30% of key photoresists achieving domestic production rates [13]. Industry Restructuring - The global semiconductor supply chain is undergoing deep restructuring due to China's mineral controls, with the EU aiming for an 80% self-sufficiency rate in minerals by 2030 and the U.S. Department of Defense investing $90 billion to build a domestic mineral supply chain [15]. - The shift from "efficiency-first" to "security-first" in supply chains poses challenges to ASML's global production model [15]. Technological Challenges - Attempts by Japanese companies to replace critical minerals have shown significant performance degradation, with experiments indicating a 47% performance drop in gallium-based magnets after 3000 hours of operation [17]. - China's dual-review mechanism for export controls requires comprehensive data tracing from mines to finished products for any foreign products using Chinese minerals, increasing supply chain transparency challenges for ASML [17].

Core Insights - The Chinese semiconductor industry is strengthening its foundation by focusing on the basic "nutrient" aspects of the supply chain rather than relying solely on a single technological breakthrough [2] - A recent announcement from the Ministry of Commerce requires approval for the export of products containing 0.1% or more of Chinese rare earth elements, directly impacting semiconductor equipment giants like ASML and Applied Materials [2] - The domestic production of key materials, such as EUV photoresists, is increasing, with the localization rate surpassing 30% for critical photoresists [4] Resource Management - The new policy on rare earth exports is a strategic move to control resources essential for semiconductor manufacturing, particularly for equipment that relies heavily on rare earth elements [2] - The establishment of a domestic EUV photoresist R&D platform in Wuxi aims to break the monopoly of foreign companies in the high-end photoresist market [4] Technological Breakthroughs - The industry is not only focusing on acquiring EUV lithography machines but is also exploring differentiated process paths, such as New Kylin's "non-lithographic compensation" strategy, which maximizes the performance of existing DUV lithography machines [7] - New Kylin's approach involves a complex process cycle to compensate for precision gaps, demonstrating a significant shift in manufacturing strategy [7] Process Integration - New Kylin has standardized high-difficulty operations, resulting in a series of equipment that supports the entire manufacturing process, achieving an 85% yield rate for 5nm logic chips in collaboration with SMIC [9] - This breakthrough indicates that the Chinese semiconductor industry can develop new pathways for advanced processes without relying on external equipment [9] Design Tools Development - The launch of EDA software by New Kylin's subsidiary, Qiyunfang, marks a significant step in breaking international monopolies in design tools, enhancing operational efficiency by 30% and reducing hardware development cycles by 40% [11] - The integration of this EDA software with domestic operating systems and databases facilitates a seamless design-manufacturing connection [13] Ecosystem Resilience - The Chinese semiconductor ecosystem is evolving into a robust structure, with rare earths and materials forming the soil, non-lithographic processes as the main trunk, and design tools as the branches [15] - This interconnected ecosystem allows for sustained vitality even in the face of localized disruptions, positioning China to redefine the competitive landscape in the global semiconductor industry [15]