TSMC seeks equipment without Chinese rare-earth magnets
TSMC, the world's largest contract chip manufacturer, is actively seeking ways to bypass potential supply chain disruptions. According to a Reuters report, the company has approached its equipment suppliers to explore factory automation solutions that utilize motors without rare-earth magnets. This move aims to reduce reliance on materials dominated by China and mitigate the risks posed by Beijing's tightening export controls.
The dependency on Chinese materials
Semiconductor fabrication plants rely on highly automated industrial machinery. These machines often use electric motors equipped with powerful permanent magnets made from rare-earth elements like neodymium, dysprosium, and terbium. China holds a quasi-monopoly over this critical supply chain: USGS data shows China accounts for roughly 70% of global rare-earth mining, while the IEA reports that China controls about 90% of refining and approximately 95% of the finished permanent magnets used in high-tech manufacturing.
The urgency of this shift follows China's strategic use of export controls. In April 2025, Beijing placed several rare-earth elements and magnets under strict licensing requirements. These controls were expanded on October 9, 2025, to include processing technologies and products containing more than 0.1% Chinese-origin rare earths. Although some expansions were suspended and later extended for 90 days, the threat to the maintenance and expansion of TSMC's massive fabs remains a significant operational risk.
Technical trade-offs and global response
Moving away from rare-earth magnets is not a simple swap, as different motor technologies involve various engineering trade-offs regarding efficiency, size, and precision. Potential alternatives being explored include:
- Induction motors: which generate torque via electromagnetic induction rather than permanent magnets.
- Switched-reluctance motors (SRM): which operate without the need for permanent magnets.
- Ferrite magnets: which can replace rare-earth magnets in certain permanent-magnet motor designs.
For a company that manufactures essential chips for Nvidia, Apple, and Qualcomm, maintaining the extreme precision and power density required for advanced manufacturing is paramount. Any shift in motor technology must balance these performance requirements against the need for supply chain security.
On a broader scale, Taiwan and the United States are working to build resilient, non-Chinese supply chains. The Taiwanese government is supporting the ITRI to establish a pilot production line for rare earths, aiming to meet 50% of domestic demand within three years. Meanwhile, the U.S. administration announced plans in February 2026 to create a $12 billion stockpile of critical minerals to offset the risks posed by China's market dominance.
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