China has further restricted its control over the export of rare earth elements, introducing new regulations that require licensing and disclosure of end use. The new restrictions are aimed at products with essential elements like scandium, dysprosium, gadolinium, terbium, lutetium, samarium, and yttrium—elements critical to high-tech industries like telecommunications, data storage, electric vehicles, and advanced electronics.
Exporters are now required to seek licenses from the Ministry of Economy and state where and how the materials will be utilized. The rule extends not just to raw metals and ores but to chemical compounds as well as finished products.
Why These Rare Earths Matter
A few top global firms—Broadcom, Qualcomm, Samsung, Seagate, Western Digital, and TSMC—depend on scandium and dysprosium in manufacturing. Scandium is utilized to enhance RF module signal quality in 5G smartphones, routers, and base stations. Dysprosium is crucial for sustaining magnet strength at elevated temperatures and is thus critical in EV motors, MRAM chips, and hard disk drives. It is also utilized in satellite and nuclear reactor radiation shielding.
These metals underlie technologies driving digital infrastructure today. As one of the few large-scale capable nations to mine and process rare earths, China has put itself at the heart of international supply chains.
A Strategic Move in the Tech Power Play
This is China’s third export restriction wave involving key materials. Previous phases singled out gallium and germanium, essential semiconductor components, followed by the extension to tungsten and indium, critical during chip making and optoelectronics.
With each wave, China went progressively deeper in penetrating the semiconductor chain, influencing wafer-level supplies to final product components. These actions intend to keep China as a leviathan within the global technology arena while also shoring up local superiority.
China’s control over rare earth took decades to build. The state-owned enterprises expanded rapidly and lowered costs, often making it economically infeasible for other countries to compete. This created in excess of 80% of the global refining of rare earth within China.
Retaliation to Tariffs and Trade Tensions
Most analysts view this action as one of a larger geopolitical chess game. China is reacting to Trump-era US-imposed tariffs on Chinese exports, including a 54% tariff on Chinese imports and a supplementary 34% duty on some imports.
As a response, China has increasingly weaponized its rare earth monopoly. Although the new regulations don’t explicitly prohibit exports, the licensing system creates bottlenecks and uncertainty. Delays and cost increases may cause firms to re-engineer supply chains or re-design products.
Global Industry on Edge
Tech producers now have longer lead times, more expensive prices, and operational uncertainty. Although other countries such as the U.S., Canada, and Australia possess rare earth reserves, they do not have the infrastructure that China has built.
Processing, refining, and mining rare earths require huge amounts of capital and years of investment. However, the recent restrictions may spur renewed interest in diversifying the supply chain away from China, provided that these countries can ramp up fast enough.
What’s Next?
China’s move solidified its position as a gatekeeper in the global tech race. The message is clear: as long as rare earths are utilized in industries, Beijing has a lot of leverage to use.
This third wave of restrictions can pave the way for even stricter limiting down the road, particularly as competition heats up in areas like AI chips, clean-energy technology, and defense applications.
Meanwhile, worldwide manufacturers must acquire the ability to adapt rapidly or risk lagging behind an increasingly geopolitics-influenced supply chain.
