China’s new regulations specifically target components required to create certain computer chips and further AI research for military uses, and they require foreign companies to get permission before exporting any item that contains even minute quantities of Chinese rare earths.
After China restricted shipments of rare-earth minerals and the US retaliated with further tariffs and limits on software sales to the Asian country, companies along the global semiconductor supply chain are preparing for disruptions from an intensifying trade war.
Threatening to halt the chips driving the AI boom, China’s limitations are the most focused action to date to restrict supply of rare-earth minerals. They are also the first significant effort by Beijing to use long-arm authority over international corporations to target the semiconductor sector. They led US President Donald Trump to declare on Friday that he would impose export restrictions on “any and all key software” and a further 100% tax on China.
The only firm in the world that produces the most sophisticated semiconductors, ASML Holding NV, may see weeks-long supply delays as a result of the rare-earth restrictions, according to a source familiar with the business.
According to a top management at a major US semiconductor business, the company is now evaluating the possible effects. According to someone speaking about operations who asked not to be named, the company’s biggest risk right now is a rise in the cost of rare earth-dependent magnets, which are essential to the chip supply chain.
The firm is trying to determine which of its products include rare earths from China, according to an executive at another US chip manufacturer, and is concerned that the country’s licensing requirements would cause its supply chain to come to a complete standstill.
It is unclear which US software items Trump’s most recent proposed export restriction will target. Following Beijing’s prior restrictions on exports of vital rare earths, the government implemented a series of actions in May, including the lifting of export license requirements for chip-design software sales in July.
China’s new regulations specifically target components required to create certain computer chips and further AI research for military uses, and they require foreign companies to get permission before exporting any item that contains even minute quantities of Chinese rare earths.
According to Gracelin Baskaran, a director at the Center for Strategic and International Studies who focuses on key minerals, “these are the harshest export limits that China has deployed.” “It is very obvious that they have the power and the sticks to force businesses anywhere, not only in the US, to comply.”