Businesses across the global semiconductor supply chain are bracing themselves for disruptions from an escalating trade war, after China imposed curbs on rare-earth mineral exports and the US responded with additional tariffs and restrictions on software sales to the Asian nation.
China’s restrictions, the most targeted move yet to limit supplies of rare-earth materials, represent the first major attempt by Beijing to exercise long-arm jurisdiction over foreign companies to target the semiconductor industry, threatening to stall the chips powering the AI boom. They prompted US President Donald Trump to announce on Friday that he would impose an additional 100% tariff on China and export controls on “any and all critical software.”
The rare-earth curbs may lead to weekslong delays in shipments for ASML Holding NV, the only manufacturer in the world of machines that make the most advanced semiconductors, a person familiar with the company said.
A senior manager at a major US chip company said the firm is still assessing potential impacts. But the clearest risk the company is facing now is an increase in the prices of rare earth-dependent magnets that are critical to the chip supply chain, this person said, asking not to be identified discussing operations.
An official at another US chip company said the business is rushing to identify which of its products contain rare earths from China and is worried that the country’s requirement for licenses will grind its supply chain to a halt.
It’s not clear what software products from the US might be hit by Trump’s latest proposed export ban. In July, the administration lifted export license requirements for chip-design software sales, rules that had been imposed in May as part of a raft of measures responding to Beijing’s earlier limits on shipments of essential rare earths.
China’s new rules require overseas firms to seek approval for shipping any material containing even trace amounts of Chinese rare earths — and explicitly call out parts used to make certain computer chips and advance AI research with military applications.
“These are the strictest export controls that China has utilized,” said Gracelin Baskaran, a critical minerals-focused director at the Center for Strategic and International Studies. “It’s quite clear that they have the sticks and the leverage to make, not just US firms, but firms worldwide comply.”
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