China's Ministry of Commerce issued a notice that has sent shockwaves through the global high-tech industry, shaking the rare earth supply chain.
On October 9, the China Ministry of Commerce released Notice No. 61 of 2025, which states that we will impose export controls on certain rare earth-related items exported abroad. The notice clearly states that foreign organizations and individuals who wish to sell specific rare earth products to countries or regions outside of China must first obtain an export license for dual-use items issued by the China Ministry of Commerce.
Moreover, this important notice specifically states that if the rare earth items applied for export are used for the research and development or production of logic chips with a process size of 14 nanometers or smaller, or storage chips with 256 layers or more, these applications will be carefully reviewed and approved one by one.
Additionally, export applications to overseas military users are generally not approved. This indicates that China has, for the first time, explicitly expanded the scope of rare earth control to the most advanced semiconductor manufacturing sector.
The recent rare earth export control notice issued by the China Ministry of Commerce is different from previous ones: it does not only regulate rare earth products directly exported from China, but also extends to the overseas supply chain. According to the notice, organizations and individuals abroad must also obtain an export license issued by the China Ministry of Commerce before exporting specific rare earth items to other countries or regions outside of China.
The controlled scope covers three categories: products containing Chinese original rare earth items manufactured abroad, items produced abroad using Chinese rare earth technology, and all rare earth items originally produced in China.
This move by China demonstrates that it is adopting a "long-arm jurisdiction" approach, extending its influence in the rare earth sector to every corner of the global supply chain. In simple terms, even if a product is manufactured abroad, if it contains key components or technologies originally from China that account for 0.1% or more, the export of this product will be subject to Chinese regulation. This clearly shows that China's influence has deeply penetrated into the global supply chain.
The notice issued by the Ministry of Commerce also clearly states that export applications for overseas military users, as well as those for importers and end-users on the export control list and the watch list, are generally not approved.
Furthermore, if the goods in the export application are used for military purposes or can enhance military potential, they will not be allowed. These regulations are essentially targeting the demand for rare earths in the U.S. defense industry.
Rare earth elements are also important in chip manufacturing, such as polishing materials, etching machine parts, and mirror coatings for high-end lithography machines. This means that even if you master the technology for manufacturing chips below 14 nanometers, you may face difficulties due to China's control over rare earth elements.
The timing and objectives of China's rare earth export control have been carefully considered. The notice issued by the Ministry of Commerce clearly states that export applications for the purpose of research and development or production of logic chips with a process size of 14 nanometers or smaller, or storage chips with 256 layers or more, as well as equipment, testing equipment, and materials for manufacturing semiconductors of the aforementioned processes, or research and development of artificial intelligence with potential military uses, will be approved on a case-by-case basis. There are very few countries in the world with related industries, and the country with a connection to military use seems to be only one.
In short, these regulations directly target the U.S. advanced semiconductor industry that is currently being vigorously promoted. Intel recently received $3 billion in direct funding from the U.S. government under the CHIPS and Science Act for the "secure enclave" program. Intel announced that its most advanced technology - Intel 18A - is expected to be put into production in 2025.
At the same time, the U.S. Defense Advanced Research Projects Agency (DARPA) is focusing on advancing quantum sensor research to address challenges in positioning, navigation, and timing, as well as intelligence, surveillance, and reconnaissance in military applications. A new program called "Robust Quantum Sensors" aims to improve the performance of quantum sensors capable of detecting the Earth's magnetic field.
China's rare earth control measures will directly affect the development process of these high-end technologies. Dependency dilemma: the European and American high-tech and defense industries' "addiction" to Chinese rare earths. China's dominant position in the global rare earth supply chain is evident from the data. The Russian newspaper "Argumenty i Fakty" reported that Beijing controls 91% of the global rare earth metal processing capacity.
98% of the imported products in the magnet production chain in the EU come from China. Germany's annual imports of products related to rare earth metals amount to a staggering 70 billion euros. The latest report by the European Central Bank also points out that the eurozone heavily relies on Chinese rare earth minerals, with China supplying 70% of the eurozone's rare earth imports. More worrying is that when eurozone suppliers purchase secondary products containing rare earths from countries other than China, these suppliers still rely heavily on Chinese rare earth raw materials.
Rare earth elements are indispensable for high-end manufacturing. Thirty percent of the permanent magnets used in the German automotive industry, especially in electric vehicle production, are made from rare earth elements, and 80% of these magnets are directly imported from China. In addition to electric vehicles, magnets are widely used in drone engines, missile guidance systems, jet engines, and satellite equipment. These areas directly relate to national defense security and strategic competitiveness.
The extent of America's reliance on Chinese rare earths is equally astonishing. According to an analysis by the Qianzhan Industry Research Institute, about 80-85% of the rare earths used in the United States are imported, of which about 70% come from China. The U.S. rare earth consumption is strongly oriented towards defense, with defense applications accounting for as high as 35%, far exceeding the global average of 8%. This data reveals the special sensitivity of the U.S. defense department to rare earth supply.
In 2023, the U.S. Defense Logistics Agency added the procurement of 3,000 tons of rare earth permanent magnets. This action by the U.S. indicates that their government is quite worried about the possibility of a rare earth supply problem. Now, the U.S. is particularly weak in the intermediate link of rare earth smelting and separation. They have only one open rare earth mine, the Mountain Pass mine in California, but in terms of refining and processing rare earths into finished products, they are highly dependent on us.
China's export control on rare earth items is not a sudden move. At the beginning of this year, when Sino-U.S. trade relations were tense, China had already strengthened the management and control of rare earth metal exports. Now, to sell rare earth metals to the overseas market, you must first obtain a license. According to the new regulations, some bureaucratic procedures can be used to delay the delivery time of rare earth metals, or even prevent the export altogether.
Facing China's rare earth control measures, the international market is actively seeking alternatives. Dennis Teng, co-CEO of Pegatron, said, "The past two or three months have been 'painful,' as the U.S.-China tariff war escalated, China began to implement export controls on key raw materials including rare earths, causing pressure on the global electronics industry supply chain."
However, the pace of implementing alternative solutions may be faster than previously expected. Pegatron has already worked with customers to modify product designs and gradually replaced relevant components with new materials. Most customers plan to use these new materials when shipping in June and July. This alternative approach mainly involves adjusting designs and making structures lighter to achieve material replacement.
But these alternative measures may only be effective for certain specific rare earth materials and cannot cover all the places where rare earth elements are used. The European Central Bank previously issued a report warning that if China's supply of rare earths were to stop, the eurozone economy would suffer, with prices rising quickly (inflation rates would increase), and economic growth would slow down. If the supply chain breaks, manufacturers' costs would rise, especially in industries such as automobile manufacturing, electronics, and renewable energy, which would be greatly affected.
The U.S. Department of Defense has also recognized the seriousness of the situation. The Strategic Capital Office under the Pentagon has included 15 key areas, such as advanced bulk materials, microelectronics materials, and nanomaterials, in its 2025 investment plan. However, the overall state of U.S. manufacturing is not good, which has been the biggest trouble for the Pentagon in recent years when trying to reorganize the military equipment.
The European Central Bank has long warned that only a small portion of enterprises in the eurozone directly purchase rare earths from China, and more than 80% of large European companies are separated from Chinese rare earth producers by two or three intermediate links. This means that even a slight interruption in China's exports could quickly spread through the supply chain to the final industries.
The restructuring of the global rare earth supply chain has already begun, but no one can easily escape dependence on Chinese rare earths in the short term. The subsequent impact of this rare earth control may be much greater than previously imagined.
Overall, the global high-end chip industry is extremely reliant on China's rare earths, and this reliance is not simple, but rather structural, multi-faceted, and deep-seated. This is mainly because China has strong rare earth refining technology, can effectively control costs, and has a complete industrial system, which together form a comprehensive advantage.
Within the next 3 to 5 years, this dependency situation is unlikely to change fundamentally. Therefore, the recent rare earth export control measures introduced by China will definitely have a significant impact on the competition situations in high-tech fields such as global semiconductors, artificial intelligence, and defense technology.
Original article: https://www.toutiao.com/article/7559571957956739624/
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