Taiwan prepares for the impact of China's new rare earth regulations

China has announced new regulations on rare earth exports, prompting Taiwan to brace for potential disruptions to its tech and manufacturing sectors.

On Oct. 9, 2025, China’s Ministry of Commerce announced new export control regulations on rare earths, restricting overseas entities from exporting products containing Chinese rare earth components to destinations outside China.

The restrictions also apply to rare earth technologies, equipment, and raw or auxiliary materials. This move impacts foreign semiconductor and defense companies that rely on Chinese rare earth materials or technologies.

The regulations cover advanced technologies, including logic chips at 14 nanometers or below, memory chips with 256 layers or more, related research and manufacturing equipment, and AI products with potential military applications.

China’s policy mirrors the U.S. "Foreign Direct Product Rule" (FDPR), introducing a form of long-arm jurisdiction over rare earth elements. For the first time, it includes a 0.1 percent value threshold. Under this rule, any product made by non-Chinese companies overseas that contains Chinese rare earth components worth 0.1 percent or more of the total product value must obtain an export license from China’s Ministry of Commerce before the product can be shipped abroad.

As of April 2025, China had already imposed export controls on seven medium and heavy rare earth elements: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. It has since expanded the list to include five additional elements, alloys, and related products: europium, holmium, erbium, thulium, and ytterbium.

At present, only five rare earth metals remain unregulated by China: lanthanum, cerium, praseodymium, neodymium, and promethium.

The "Financial Times," reported that China controls approximately 70% of rare earth mining, 90% of separation and processing, and 93% of magnet manufacturing.


Taiwan response

Semiconductors are a key driver of Taiwan's economic growth, and China's rare earth controls could impact this economic lifeline—drawing concern from both ruling and opposition parties.

On October 14, Taiwan’s Minister of Economic Affairs, Kung Ming-hsin (龔明鑫), responding to questions from Legislator Hsieh Yi-fong (謝衣鳳) in the Legislative Yuan, stated that the controls significantly affect permanent magnets used in high-speed motors for drones and electric vehicles.

During the same session, Kung noted that in the past, Europe, the U.S., and Japan imported and processed rare earths, after which Taiwan imported semi-finished materials or equipment from them. He added that the government has already begun supporting manufacturers in refining and purifying rare earths domestically.

On October 15, Kung attended the "2025 Zero Carbon Sustainability Summit" and, in a media interview after the event, said that although the rare earth issue currently has only an indirect impact on Taiwan, the government will continue to monitor developments closely and coordinate with international partners to address potential challenges.

Kung also noted that the government is in communication with relevant domestic industry associations and is considering measures such as enhancing rare earth recycling and refining technologies or increasing strategic material reserves to strengthen the resilience of Taiwan’s industries.

Security expert suggests fixes

Heh Tzeng-Yuan (賀增原), Director of the Division of Cyber Security and Decision-Making Simulation at the Institute for National Defense and Security Research, told TCN that the 0.1% value threshold regulation could have the most significant impact.

Taking gallium as an example (a critical mineral, though not a rare earth), Heh said that China can only extract crude gallium from bauxite, which must then be refined by Japan or Germany before being sold to Taiwan. He noted that Taiwan’s imports typically come from countries like Japan, and that Taiwan is certain to be affected, though the full extent of the impact will take time to assess.

He stated that China’s current approach involves reviewing technical blueprints and supply chains, tracking the origin of rare earth materials based on declarations, and conducting case-by-case reviews that extend to end use.

Fully implementing the 0.1% control, Heh said, would be an extremely challenging task.

Regarding Taiwan’s response, Heh proposed two strategies.

Heh stated, “First, advanced nations should accelerate the rebuilding of industrial supply chains. For instance, MP Materials, the only U.S. company with large-scale rare earth mining and processing capabilities, has had 15% of its shares acquired by the U.S. Department of Defense. To mitigate geopolitical risks, Taiwan should collaborate with countries like the US, Australia, Brazil, and Malaysia to strengthen the reconstruction of critical mineral supply chains.”

The second approach, Heh added, is to embrace urban mining, extracting critical minerals from recycled waste materials, such as discarded consumer electronics (3C products) and manufacturing scrap.

As global supply chains become more entangled with geopolitical risk, Taiwan's ability to secure critical minerals, whether through international cooperation or domestic innovation, will be essential to safeguarding its technological and economic resilience in the years ahead.