On October 9, 2025, China announced expanded export controls on rare earths. While this move isn’t expected to immediately disrupt TSMC’s chip production, it does highlight long-term geopolitical and supply chain risks. The new rules require export licenses for any products containing over 0.1% Chinese-origin rare earths or produced using Chinese technology, extending China’s influence even to products made overseas—such as semiconductor tools and materials.
Impact on TSMC and Taiwan
Taiwan’s Ministry of Economic Affairs has clarified that the newly restricted rare earth elements—holmium, erbium, thulium, europium, and ytterbium—are not critical to TSMC’s wafer fabrication process. Most of Taiwan’s rare earth derivatives are sourced from the U.S., Japan, and Europe rather than China, which reduces the island’s direct exposure. TSMC executives, including Senior Vice President Cliff Hou, confirmed that the company’s current rare earth inventory is sufficient. While switching to non-Chinese suppliers would take time, the transition is considered manageable.
Strategic and Long-Term Concerns
Although the immediate impact on operations is limited, China’s controls reinforce its strategic leverage over global technology supply chains—particularly for semiconductors, magnets, and defense applications. With China controlling around 85–90% of global rare earth processing, even small disruptions could increase costs and risks over time.
Notably, China’s approach mirrors the U.S. “foreign direct product rule,” asserting extraterritorial control over foreign products that use Chinese materials or technology. This reflects the growing strategic competition between the U.S. and China in advanced technology sectors.
Looking Ahead
For now, TSMC and Taiwan’s chip industry face minimal operational risk. However, these export controls serve as a reminder that global technology supply chains are becoming increasingly weaponized. Over the medium term, TSMC’s ability to secure alternative sources and refined materials will be tested as the market adjusts to a more fragmented rare earth ecosystem.
Implications for India and the Global Semiconductor Industry
Countries like India, along with other global semiconductor players, face potential risks from these developments. To mitigate such risks, it may become essential to negotiate new agreements or MOUs with China, ensuring a balanced business relationship while securing access to critical rare metals and materials.