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China’s New Rare Earths Regulation: A Potential Disruption to the Global Chip Manufacturing Industry

Posted by Paul Saluja | Jul 02, 2024

In a significant move set to reshape the global supply chain of rare earth elements and minerals, China has announced that all rare earths and resources on its land will now be state-owned. This new regulation, effective October 1, 2024, is expected to bring broad and sweeping changes to how these critical supplies are shipped worldwide.

Background and Motivation

China's decision to nationalize its rare earth resources is widely viewed as a strategic response to ongoing international sanctions and U.S. export restrictions. These sanctions have limited China's access to advanced wafer fab equipment necessary for producing chips at sub-14nm and 16nm processes. By asserting state control over its rare earth elements, China aims to safeguard its industrial interests against these external pressures.

Impact on the Global Chip Manufacturing Industry

China is one of the world's largest producers of Gallium and Germanium, metals crucial for semiconductor manufacturing. Despite their abundance, these metals have been sold relatively cheaply by Chinese suppliers. The nationalization of these resources could disrupt this dynamic, forcing chip manufacturers to seek alternative sources, which may not be as cost-effective or readily available.

Moreover, China produces 70% of the world's rare earth elements, which are essential for manufacturing various electronic components. The new regulation could significantly impact the availability and pricing of these materials, creating ripple effects throughout the global electronics industry.

Potential Consequences and Responses

With the new ruling, the global semiconductor industry might face several challenges:

  1. Supply Chain Disruptions: Companies relying on Chinese rare earths and minerals may experience supply shortages and increased costs. This could lead to delays in production and higher prices for end consumers.

  2. Search for Alternatives: Manufacturers may need to diversify their supply chains, seeking alternative sources for Gallium, Germanium, and other rare earth elements. This could involve increased mining activities in other regions or investments in recycling and material recovery technologies.

  3. Technological Innovations: The industry might accelerate research into alternative materials and technologies that reduce dependence on rare earth elements. This could spur innovation but might also require substantial time and investment.

  4. Geopolitical Tensions: The regulation could further escalate trade tensions between China and other countries, particularly the United States. It may prompt retaliatory measures or negotiations aimed at stabilizing the supply of critical materials.


China's new regulation on rare earth resources represents a strategic maneuver to strengthen its industrial position amidst international pressures. While the full impact of this move will unfold over time, it is clear that the global chip manufacturing industry must brace for potential disruptions and adapt to a changing supply landscape. Companies and governments alike will need to collaborate and innovate to ensure a steady flow of these vital materials, balancing economic interests with geopolitical considerations.

Saluja Law will continue to monitor these developments and provide updates on how they might affect the semiconductor industry and related sectors. For more information and legal advice on navigating these changes, please contact our office.

About the Author

Paul Saluja

Paul Saluja is a distinguished legal professional with over two decades of experience serving clients across a spectrum of legal domains. Graduating from West Virginia State University in 1988 with a bachelor's degree in chemistry, he continued his academic journey at Ohio Northern University, gr...

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