The move is Beijing’s latest attempt to tighten
control over global production of the metals, which are essential to the manufacture
of computer chips.
China
has unveiled sweeping new export
restrictions on rare earth metals,
deepening its control over the global supply of materials critical to semiconductors, electric vehicles, and
artificial intelligence systems.
The rules, effective December
1, will
bar the transfer of rare earths, related technologies, and manufacturing
know-how abroad — effectively extending Beijing’s jurisdiction over global tech
production.
Hours
after the announcement, China also said it would limit exports of battery-manufacturing
equipment from November 8, aiming to secure its lead in the
fast-growing EV sector. The Ministry of Commerce said the curbs were meant to prevent military use of the materials, citing examples such as
samarium, which is used in U.S. fighter jets and
missiles.
The
restrictions could disrupt supply chains for tech giants like Nvidia and Apple, which rely on rare earths in chips,
smartphones, and A.I. hardware. China refines nearly all of the world’s samarium and 99% of its dysprosium, both essential to chipmaking and
electric motors. The world’s only producer of ultrapure dysprosium — a refinery
in Wuxi controlled by Shenghe Resources, a state-backed firm — further
underscores China’s dominance.
The
measures grant broad powers to the Commerce Ministry to block exports of any
device containing Chinese rare earths, even if the content accounts for just 0.1% of value, effectively mirroring Washington’s
extraterritorial export control tactics. Analysts say the move could give
Beijing unprecedented leverage over global
A.I. and electronics supply chains.
The
new curbs come ahead of a planned meeting between Xi Jinping and Donald Trump, amid renewed U.S.–China trade tensions. Earlier this year, Beijing restricted
rare earth and magnet exports to the United States and Europe in retaliation
for Western tariffs on Chinese EVs.
European
Union officials expressed concern, urging China to ensure “stable and predictable access” to critical minerals. Industry observers
warned that, while Western firms have begun building new rare earth facilities,
full production could take years, leaving global supply chains vulnerable to
Beijing’s tightening grip.
The
Chinese government announced on Thursday that it was escalating its curbs on exports
of rare earth metals, as Beijing claims broader jurisdiction over the global manufacture
of semiconductors and other technology.
The
new rules, which are set to take effect Dec. 1, are the latest step by Beijing as
it tightens the reins on rare earths to exploit China’s dominance in the sector.
Hours
later, Beijing announced that starting on Nov. 8, it will also restrict exports
of many kinds of equipment needed to manufacture batteries for electric cars, in
a bid to protect China’s competitive advantage in the car industry as well.
The
rare earth rules could scramble the supply chains of some of the world’s biggest
companies, including Nvidia and Apple. Rare earths are essential for the production
of many computer chips, which are used in everything from smartphones to artificial
intelligence systems. Rare earths are also used to make the magnets that power the
electric motors in drones, factory robots and offshore wind turbines, as well as
the brakes, seats and other systems in cars.
China’s
Ministry of Commerce said in a statement that the measures were needed to prevent
rare earth metals from being used in technologies with possible military applications.
For example, China refines all of the world’s samarium, a rare earth metal used
by the United States to make F-35 fighter jets and a wide range of missiles.
The
ministry said rare earth exports to overseas military suppliers “will not be approved.”
Foreign governments and businesses have insisted that most rare earths are used
for civilian purposes.
China
mines and processes the vast majority of the world’s rare earths. The rules issued
on Thursday bar the transfer from China of any equipment or information that would
help other countries establish their own production of rare earths or rare earth
magnets.
Companies
in the United States and Europe have been working to set up half a dozen factories
for the production of rare earth magnets, and these factories have, for the most
part, already taken delivery of needed equipment. But it can take up to three years
for such factories to ramp up to their maximum production capacity.
The
rules issued on Thursday give broad authority to China’s Ministry of Commerce to
restrict not just rare earth metals and magnets, but also the many devices like
electric motors and computer chips that contain these materials.
“China is playing hardball,” said Jimmy Goodrich,
a senior fellow at the University of California Institute of Global Conflict and
Cooperation. The move “could position Beijing to have complete control of the global
A.I. and modern electronics supply chain,” he added.
President
Trump and Xi Jinping, China’s top leader, are expected to meet soon for talks that
are likely to include their countries’ many trade disputes. China restricted rare
earth exports to the United States in April in response to Mr. Trump’s tariffs.
Beijing has also restricted exports of rare earth magnets to Europe while demanding
relief from European tariffs on electric cars from China.
European
Union officials were “concerned” by the latest restrictions, Olof Gill, a spokesman
for the European Commission, said at a news conference on Thursday. “The commission
expects China to act as a reliable partner and to ensure stable, predictable access
to critical raw materials,” he added.
Chinese
government inspectors this summer ordered factories in the rare earth industry not
to transfer any manufacturing equipment out of the country. Many industry technicians
in China have been required to surrender their passports to prevent them from leaving
the country.
For
the past year, China has been gathering information on how companies around the
world use rare earths. Since last October, exporters have been required to provide
the authorities with detailed tracings of how shipments are used in Western supply
chains.
China
refines 99 percent of the world’s dysprosium, a kind of rare earth that is used
in chips to preserve magnetic stability even when they become hot.
In
the last few years, Nvidia and other semiconductor manufacturers have changed the
material used in electricity management devices, called capacitors, on chips to
make them more heat-resistant. The capacitors are made from ultrapure dysprosium,
which is extremely difficult to refine. A single refinery in Wuxi, near Shanghai,
produces the entire world’s supply of ultrapure dysprosium.
That
refinery is controlled by Shenghe Resources, a Chinese
company whose biggest shareholder is China’s Ministry of Land Resources. Shenghe acquired an 86 percent stake in the refinery on April
1 from a Canadian company, Neo Performance Materials.
The
United States has been aware of its vulnerability on rare earth metals since 2010,
when China imposed a two-month embargo on rare earth exports to Japan. But progress
on developing alternatives has been slow.
“China
has cornered the market for processing and refining of key critical minerals,” former
President Joseph R. Biden Jr.’s administration said in a statement last year.
Japanese
companies are believed to hold sizable stockpiles of rare earths. South Korean companies
imported large quantities of dysprosium in January and February from China as Beijing
began imposing restrictions, China’s customs data shows.
In
April, China imposed export controls on seven of the 17 kinds of rare earths as
well as magnets made from them. The rules issued on Thursday are much broader, with
some of the rules covering all rare earths.
The
importance and power of China’s control over crucial steps in global supply chains
have intensified in recent years, said Martin Chorzempa,
a senior fellow at the Peterson Institute for International Economics. “And China’s
confidence in those choke points has gone up,” he said.
Rare
earth materials are essential for the manufacturing of advanced semiconductors,
including multiple types of memory chips and logic chips.
The
new rules would require businesses that make most chips to obtain an export license
to sell them anywhere in the world. That means the rules could apply to companies
like Taiwan Semiconductor Manufacturing Company, which makes most of the world’s
advanced logic chips, and SK Hynix and Samsung, the South Korean makers of memory
chips.
Both
kinds of chips are crucial components of the computers that power advanced A.I.
systems. They are also technologies that Chinese companies have struggled to manufacture
as well as foreign competitors do.
Most
chip makers and their suppliers are careful to maintain their inventory of rare
earths used in production, blunting the immediate impact of the new rule, said Joanne
Chiao, an analyst at TrendForce,
a market research firm in Taiwan.
The
rule’s sweeping scope mirrors how Washington has used export controls to control
chip production anywhere in the world that uses American software or machinery.
Beijing has denounced for many years the “long-arm jurisdiction” of the United States
that requires other countries not to send to China many kinds of computer chips
made with American technology. But with the rules issued on Thursday, China has
turned the tables on the United States.
China’s
latest rule restricts international shipments of products in which as little as
0.1 percent of the value consists of rare earths from China.
“It’s
impossible to know whether or not a tech product has 0.1 percent Chinese rare earth
content,” said Mr. Goodrich of the University of California Institute of Global
Conflict and Cooperation.
A.I.-related
sales have become the primary growth engine for the global economy. This week, the
World Trade Organization said A.I. goods accounted for nearly half of the annual
increase in global trade growth this year.
Nvidia
has become the world’s most valuable company by selling to companies around the
world advanced A.I. servers that contain technology manufactured in Taiwan, South
Korea and elsewhere. But the U.S. government has curtailed the sale of those chips
to foreign countries because of concerns that China and others could use them to
develop new weapons or leap ahead of American companies in developing A.I. technology.
Nvidia
declined to comment, and TSMC did not immediately respond to a request for comment.