TSMC Seeks Chip-Making Equipment Free of Chinese Rare-Earth Magnets
TSMC, the world’s largest contract chip manufacturer, is seeking alternatives to manufacturing equipment that uses permanent magnets based on rare-earth elements whose production and processing are controlled by China. This move aims to reduce dependence on materials sourced from China, which face export restrictions that could affect the company’s factory operations.
🔧 The Importance of Rare-Earth Elements in Chip Manufacturing
Semiconductor fabrication plants, such as those operated by TSMC, rely on advanced industrial machines that use electric rotors equipped with strong permanent magnets made from rare-earth elements, such as niobium, dysprosium, and terbium. These magnets enable electric motors in industrial automation systems to operate with high precision and efficiency, supporting the complex production processes in chip factories.
However, China’s control over this materials industry is extremely significant, as it accounts for about 70% of global rare-earth ore extraction. In addition, China possesses nearly 90% of refining capacity and 95% of permanent magnet production.
🇨🇳 Impact of Chinese Restrictions on the Global Supply Chain
China began imposing export restrictions starting in 2025 on a group of rare-earth elements and the magnets made from them, which required special export procedures and individual permits for companies. More recently, China expanded these restrictions to include five additional elements, processing technologies and equipment used in manufacturing, as well as products made outside the country containing more than 0.1% of these materials.
These measures have created direct challenges for companies such as TSMC, which rely on these materials to run their production lines, threatening the stability of manufacturing operations and pushing them to look for alternative technical solutions that would reduce dependence on these materials, over which Chinese control predominates.
⚙️ Motor Alternatives That Do Not Rely on Rare-Earth Elements
TSMC is working to communicate with its industrial equipment suppliers to determine whether it can obtain modern automation equipment that uses electric motors not dependent on rare-earth magnets. Several technologies are available to achieve this, including:
- Conventional induction motors that operate through electromagnetic induction without using a permanent magnet.
- Switched-reluctance motors that use a different design to generate torque without relying on rare-earth magnets.
- Permanent-magnet motors using iron or ferrite magnets instead of rare-earth magnets.
However, these alternatives use different technologies that involve trade-offs in several areas, such as efficiency, size, power density, precision, and control requirements.
🌍 Efforts to Build an Alternative Supply Chain Outside China
In addition to direct technical steps, Taiwan and the United States are seeking to develop local production capabilities for rare-earth elements, with the aim of reducing dependence on Chinese resources, which pose a geopolitical and economic concern.
Taiwan is supporting the Industrial Technology Research Institute to establish a pilot production line within the next three years that could meet about half of the country’s rare-earth needs. At the same time, the United States is working with its partners to expand refining capacity and international supply sources, and it is encouraging the development of new applications to provide a more resilient and sustainable supply chain.
An earlier U.S. administration also announced plans to create a strategic stockpile worth a large sum of money to ensure an adequate reserve in the event of supply disruptions from China.
🚀 The Future of Chip Manufacturing Amid Resource Dependency Challenges
The chip manufacturing industry faces multiple challenges as production technologies become more complex and advanced. This concerns not only the hardware, software, and minute elements of chips, but also the mechanical and electrical components used in production lines.
TSMC’s move comes as part of the company’s effort to maintain stable production of chips used in artificial intelligence, cloud computing, and the enablement of advanced technology industries.
It can be seen as a model for what will be required of major technology companies in terms of diversification and thinking about supply chain sustainability, especially in light of the geopolitical pressures facing the global technology industry.
Source: Tom’s Hardware
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