Taiwan semiconductor sector shields chip production from China rare earth cuts

Taiwan's government officially assured the public and global partners that China's latest rare earth export restrictions will not significantly affect the island’s vital chip manufacturing industry.

Ministry officials explained that local semiconductor producers already rely heavily on rare earth inputs sourced from regions other than China, such as Europe, the United States, and Japan.

This comes after Beijing tightened its grip on rare earths last Thursday, broadening export controls, adding new elements to its list, and raising licensing hurdles for foreign chipmakers.

Despite these moves, Taiwan’s economy ministry emphasized that the newly restricted elements are not crucial for Taiwan’s semiconductor processes.

How did Taiwan respond to China’s rare earth export restrictions?

Taiwan’s Ministry of Economic Affairs issued a statement downplaying the threat China’s restrictions pose to the domestic chip industry. Officials noted that the substances China targeted are distinct from those required by Taiwanese semiconductor manufacturers.

Hence, any direct impact is expected to be minimal in the short to medium term. The announcement was made to ease concerns of supply chain disruption in a sector already under pressure from global geopolitical tensions.

Given Taiwan’s position as a major semiconductor supplier, the government sought to reassure tech and investment communities worldwide.

Did you know?
TSMC, headquartered in Taiwan, produces around 60 percent of the world’s advanced semiconductor chips and is considered the linchpin of global AI and electronics supply chains.

Where does Taiwan source rare earths for semiconductor manufacturing?

Taiwan has worked over the years to diversify raw material imports for its chip sector. Currently, the vast majority of rare earth materials needed for domestic integrated circuit fabrication come from sources other than China.

The leading suppliers include countries in Europe, the United States, and Japan. This strategic diversification proved critical during China’s recent moves.

The Ministry of Economic Affairs reiterated that the semiconductor-grade rare earths covered by China’s latest export bans do not meet Taiwan’s material requirements, thereby insulating domestic chip processes from immediate risk.

What risks do China’s controls pose for global supply chains?

While Taiwan’s chipmakers may be shielded, the global technology supply chain faces broader risks. China’s rules now require foreign companies to secure approvals to export any products with even trace rare earth content from the mainland.

This development may delay shipments, particularly of specialized chipmaking equipment, as seen with companies like ASML.

China’s dominant position responsible for nearly 70% of mining and more than 90% of the world’s rare earth processing means the controls could impact sectors from EV batteries to consumer drones, beyond just semiconductor production.

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Why is the US-China summit heightening trade tensions?

The timing of China’s rare earth announcement is seen as strategic, coming ahead of the first in-person meeting between Presidents Donald Trump and Xi Jinping since Trump’s reelection.

Scheduled to take place during the Asia-Pacific Economic Cooperation summit in South Korea, the summit’s agenda is now expected to focus on trade and supply chain stability.

President Trump quickly responded with the introduction of 100% tariffs on select Chinese goods, warning that escalating tariffs would follow if China’s restrictions tightened or persisted.

Beijing defended its measures as national security actions and criticized the United States for its own extensive export controls.

Which technology industries are still vulnerable to rare earth curbs?

Taiwan’s economy ministry acknowledged the risk extends beyond chips. Sectors such as electric vehicles, renewable energy, and drone manufacturing remain vulnerable due to the deeper integration of Chinese rare earths.

Supply chain analysts urge global stakeholders to closely monitor ongoing developments, as any expanded restrictions could disrupt advanced manufacturing flows worldwide.

In the wake of these developments, Taiwan’s leadership remains vigilant, continuing to adapt its sourcing strategies while collaborating with trade partners to maintain stability in the semiconductor industry.

The situation highlights the importance of robust cross-border relationships in safeguarding vital technology assets during uncertain geopolitical times.