Chipmakers Face Rare Earth Shortages, Taiwan Invasion Risk
A recent report indicates that semiconductor manufacturers like TSMC continue to grapple with shortages of rare earth materials despite a 2025 US-China trade truce. Concurrently, U.S. officials have warned the CEOs of Nvidia, Apple, and AMD about the risk of a Chinese invasion of Taiwan by 2027, heightening concerns over supply chain security.
China's export controls now cover nearly all 17 rare earth elements and extend to processing technologies, giving the rules extraterritorial reach. Foreign firms need a license to export products with even trace amounts of Chinese-sourced rare earths or those made with Chinese tech, and Beijing has tightened control over the movement of experts in the field. The impact is tangible: shipments of yttrium from China to the U.S. fell from 333 tons to just 17 tons in the eight months following the controls. This has caused prices for materials like yttrium to increase 69-fold year-over-year, while shortages of scandium, crucial for 5G chips, are also hitting U.S. manufacturers. Taiwan's dominance in fabrication is stark: the island produces over 60% of the world's semiconductors and more than 90% of the most advanced chips. TSMC alone commands roughly 70% of the global foundry market, a figure that rises to over 90% for chips made on sub-7nm process nodes essential for AI accelerators. In a July 2023 briefing, CIA Director William Burns and Director of National Intelligence Avril Haines directly warned the CEOs of Apple, Nvidia, and AMD that China's military aims to be ready for a Taiwan invasion by 2027. The warning was intended to push the tech giants to reduce their dependency on Taiwanese manufacturing. The potential economic fallout is estimated to be catastrophic, with one analysis projecting a $10 trillion loss to the global economy in the first year of a conflict, far exceeding the impact of the 2008 financial crisis. TSMC officials have stated their highly advanced facilities would become inoperable in the event of an invasion. This has led to discussions of extreme contingency plans. A paper from the U.S. Army War College and a statement by former U.S. National Security Advisor Robert O'Brien have floated a "scorched-earth" strategy: destroying TSMC's fabs to prevent them from falling into China's hands.
