TSMC explores rare-earth alternatives for chip factory equipment

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TSMC rare-earth chip alternatives

Highlights

TSMC has begun surveying suppliers about rare-earth-free motors for factory automation to mitigate risks from China's export controls on rare-earth materials.
Efforts to reduce dependence on Chinese rare-earths align with broader U.S. and Taiwan moves to secure alternative supply sources and strengthen critical-mineral supply chains.
Taiwan's Economy Minister announced government support for ITRI's rare-earth technology development, targeting a pilot line within three years to meet 50% of domestic demand.

Supplier review targets equipment resilience

As first reported by Reuters, TSMC has surveyed suppliers on the use of rare-earth-free motors in factory automation equipment, according to three industry executives briefed by the company on its plans. The review is aimed at reducing the risk that Beijing's export controls on certain rare-earth materials, magnets and related processing technology could interrupt operations at plants producing advanced semiconductors.

Rare-earth magnets are widely used in motors that power moving parts in industrial machinery, including systems common in highly automated chip fabs. Any shortage of those specialised parts could affect production serving smartphone, AI system, data centre and defence supply chains.

Two of the people said the discussions are still at an early stage and have not yet led to a broad rollout of rare-earth-free equipment. One person said concern over possible supply disruption from China is driving the effort.

Taiwan and U.S. seek broader supply-chain options

TSMC's planning follows broader moves by Taiwan and the U.S. to cut reliance on Chinese rare-earth and critical-mineral supply chains. China last year placed certain rare-earth materials, magnets and related processing technology under export controls, requiring licences and exposing a strategic pressure point for the global semiconductor industry.

In June, Raymond F. Greene, director of the American Institute in Taiwan, said the U.S. is working with Taiwan and other partners to develop alternative supply sources, expand processing capacity and build more resilient supply chains. Taiwan Economy Minister Kung Ming-hsin said in February that the government would support the Industrial Technology Research Institute, or ITRI, in developing rare-earth technologies, with a pilot production line planned within three years to meet an estimated 50% of domestic demand.

A person at a U.S.-based think tank familiar with the discussions said U.S. officials have shown particular interest in ITRI's work and have held talks with the institute on diversifying critical-mineral supply chains. In a statement, ITRI said it is working with the Department of Industrial Technology at Taiwan's Ministry of Economic Affairs to plan a rare-earth project, but it provided no further details.

In our earlier article, we looked at China’s position on rare-earth export licensing for Europe ahead of the January deadline tied to the U.S.-China trade arrangement. We noted Beijing’s willingness to keep approvals moving via a “green channel” as EU-China talks continue, underscoring how policy shifts around critical minerals can quickly become a strategic supply-chain pressure point.

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