TSMC supplies the extremely powerful Nvidia chips that are facilitating the AI boom. It also manufactures chips for Apple, Broadcom, Qualcomm, and numerous other tech and automotive companies. The company operates enormous, highly automated semiconductor fabrication plants. These factories use industrial machinery that relies on electric motors with powerful permanent magnets made from rare-earth elements such as neodymium, dysprosium, and terbium.
According to the U.S. Geological Survey (USGS), China accounts for roughly 70% of global rare earth mining. The International Energy Agency (IEA) says China also controls around 90% of refining and approximately 95% of the finished permanent magnets found in TSMC’s machines, giving Beijing a quasi-absolute monopoly over one of the most critical technology supply chains. In April 2025, the country placed seven medium and heavy rare earths and the magnets made from them under export controls , requiring exporters to seek case-by-case approval and export licenses, thereby choking shipments to manufacturers across the U.S., Europe, and Asia, including TSMC.
China expanded the controls on October 9, 2025, to include five additional rare earths , processing technology and equipment, and even products manufactured outside the country that contain more than 0.1% Chinese-origin rare earths, or are made using Chinese processing technology. It later suspended the October expansion for one year, until November 10, 2026. This has now been extended for an additional 90 days.
TSMC’s moves aim to reduce the risk that these controls will hinder production at its factories. Even with all other raw materials and machinery required to manufacture its chips, shortages of specialized motor components could complicate the maintenance, repair, or expansion of its production equipment. Several technological approaches allow motors to avoid rare earth magnets. Conventional induction motors, for example, generate torque using electromagnetic induction rather than permanent magnets. Switched-reluctance motors are another option, while some permanent-magnet motors can use ferrite magnets instead of rare-earth magnets. However, these technologies typically involve different trade-offs in efficiency, size, power density, precision, and control requirements.
China strategically slows exports of critical materials used in semiconductor fabrication to Taiwan
TSMC fab equipment demand nearly doubles in six months
Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/tech-industry/semiconductors/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/semiconductors/tsmc-is-seeking-chipmaking-equipment-that-doesnt-contain-chinese-rare-earth-magnets-asks-suppliers-to-provide-alternative-motors-as-export-controls-threaten-fab-operations#main
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Informational only. No financial advice. Do your own research.