Economy

China’s Rare Earth Curbs: Will Taiwan’s Chipmakers Dodge the Bullet?

Taiwan’s chip sector unaffected by China‘s rare earth controls; global supply chains may see impacts.

October 12, 2025, 11:19 AM

Gloved hands of a technician in a cleanroom suit holding up a central processing unit (CPU) chip for inspection.

A technician, likely working for a major Taiwan chipmaker, is carefully inspecting a high-tech processor chip held between gloved fingers in a laboratory environment. By MDL.

Executive Summary

Taiwan’s economy ministry does not expect China’s new rare earth export controls to significantly impact the island’s semiconductor industry due to differing material needs and diverse sourcing.

Despite the limited direct impact on Taiwan’s chip sector, China’s expanded controls could disrupt global supply chains for other high-tech products like electric vehicles and drones.

China defended its export curbs on rare earth elements by citing concerns over their military applications amid a period of “frequent military conflict.”

The Story So Far

China has strategically expanded its export controls on rare earth elements, a move that comes amidst heightened geopolitical tensions and ahead of anticipated discussions between President Donald Trump and Chinese President Xi Jinping. Beijing justifies these restrictions by citing concerns over military applications and a period of “frequent military conflict,” underscoring the strategic importance of these materials in global supply chains, even though Taiwan’s leading semiconductor industry does not expect a significant direct impact due to diverse sourcing.

Why This Matters

While Taiwan’s crucial semiconductor industry remains largely unaffected by China’s expanded rare earth export controls due to diverse sourcing and specific material requirements, the broader global supply chain for other high-tech products like electric vehicles and drones could face significant disruptions. This move, justified by China on strategic military grounds, highlights the increasing geopolitical weaponization of rare earth elements, particularly ahead of anticipated discussions involving President Donald Trump and Chinese President Xi Jinping.

Who Thinks What?

Taiwan’s economy ministry believes China’s new rare earth export controls will not significantly impact the island’s semiconductor industry, as the specific banned rare earths differ from those essential for chip manufacturing, and Taiwan sources these materials from Europe, the United States, and Japan.

China (Beijing) asserts its export curbs are justified due to concerns over the military applications of these metals, citing a period of “frequent military conflict” as a motivator for the new restrictions.

Taiwan’s economy ministry announced on Sunday that new export controls implemented by China on rare earth elements are not expected to significantly impact the island’s semiconductor industry. The ministry clarified that the specific rare earths covered by Beijing’s expanded ban differ from those essential to Taiwan’s chip manufacturing processes. This development comes as China tightens its grip on the rare earths sector ahead of anticipated discussions between President Donald Trump and Chinese President Xi Jinping.

On Thursday, China significantly broadened its export controls, adding five new elements and increasing scrutiny for chip users. Taiwan’s economy ministry stated that domestically needed products or derivatives containing rare earths are primarily sourced from Europe, the United States, and Japan.

Taiwan is a global leader in semiconductor production, home to TSMC, the world’s largest contract chipmaker. TSMC is a major producer of advanced chips critical for artificial intelligence applications.

Global Supply Chain Implications

Despite the limited direct impact on Taiwan’s chip sector, the ministry cautioned that China’s expanded controls could affect global supply chains for other products. Industries such as electric vehicles and drones may experience disruptions, necessitating close monitoring of the situation.

Earlier on Sunday, Beijing defended its export curbs, citing concerns over the military applications of these metals. China’s statement highlighted a period of “frequent military conflict” as a motivator for the new restrictions.

Key Takeaways

While Taiwan’s semiconductor industry appears insulated from China’s latest rare earth export curbs due to differing material requirements and diverse sourcing, the broader global supply chain for other high-tech products could face impacts. China’s justification for the controls points to strategic military considerations, underscoring the geopolitical sensitivity of rare earth elements.