China Clamps Down Even Harder on Rare Earths
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.
The Chinese government on Thursday announced 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 that 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.
The new rules come as 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 has 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.
The timing comes as 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.
Tripp Mickle contributed reporting from San Francisco, Xinyun Wu from Taipei, Taiwan and Jeanna Smialek from Brussels. Siyi Zhao contributed research from Beijing.
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He lived and reported in mainland China through the pandemic.
Meaghan Tobin covers business and tech stories in Asia with a focus on China and is based in Taipei.
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