China Tightens Rare Earth Controls, Targeting Defense & Semiconductors

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China has recently enhanced its restrictions on exporting rare earth elements, including five additional elements—holmium, erbium, thulium, europium, and ytterbium—along with various refining technologies, effective November 8th.
The new regulations prohibit overseas defense entities from obtaining export licenses and impose strict controls on advanced semiconductor manufacturing, including chips measuring 14 nanometers or smaller and memory with 256 layers or more. Licensing for related research and development is also affected.
Foreign producers using Chinese rare earth materials or equipment in their final products will now need export approval from China, even if no Chinese companies are involved in the transaction.
These measures mirror U.S. restrictions on semiconductor exports to China and aim to increase Beijing’s leverage ahead of expected high-level meetings with the U.S., scheduled for later this month in South Korea.
The restrictions encompass dozens of mining and refining tools and materials, with enforcement beginning just before a 90-day trade truce with the U.S. expires. Regulations concerning foreign companies exploiting Chinese rare earths go into effect on December 1st.
In addition, China has declared that international defense applications will no longer qualify for export licenses, and approval for advanced chip applications will be evaluated individually. This applies to cutting-edge chips, memory, and related production equipment, as well as AI research with potential military uses.
South Korea, home to major memory chip companies Samsung and SK Hynix, is currently reviewing these new restrictions and is in ongoing discussions with China to mitigate their repercussions. TSMC, Taiwan’s prominent chipmaker, saw its shares increase after reporting strong third-quarter revenue, despite the geopolitical concerns.
Despite some ongoing increases in Chinese rare earth exports due to licensing amnesties, many foreign users still face difficulties obtaining the necessary permissions. China’s latest restrictions are expected to impact global supply chains but include measures to facilitate licensing processes.

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