China has announced immediate export controls on seven more rare earth elements critical to enterprise IT hardware manufacturing, firing a fresh salvo in the ongoing tech trade war. This move could significantly impact tech giants including Dell Technologies, HP, Apple, and IBM, along with semiconductor leaders such as Intel, Samsung, and TSMC.
The new controls issued by China’s State Council require export licenses for samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium — along with their alloys, oxides, and compounds. These materials are essential components in data center storage systems, networking equipment, and semiconductors.
“This development is materially more targeted — and potentially more destabilizing — than most previous supply chain disruptions we’ve tracked since 2020,” said Sanchit Vir Gogia, CEO and chief analyst at Greyhound Research. “What elevates the severity is the lack of short-term substitutability. Unlike chips or cables, these elements can’t simply be redesigned out of a supply chain.”
Among these materials, dysprosium, scandium, and terbium are particularly critical for the IT industry as irreplaceable components in high-performance magnets used in hard disk drives, while yttrium and scandium are essential for advanced semiconductor chips powering AI systems.
This move appears to be a calculated response to escalating technology trade tensions, following the Trump administration’s recent expansion of semiconductor export controls and decision to raise tariffs on most Chinese goods to 54%.
Major hardware makers in the crosshairs
The materials subject to these new controls play crucial roles in products from nearly every major enterprise hardware manufacturer. Western Digital and Seagate rely heavily on rare earth magnets for their high-capacity drives, while Cisco, Juniper Networks, Dell, HP, and Lenovo incorporate these materials in various components.
“AI-first infrastructure rollouts — particularly those involving GPUs, edge accelerators, and high-efficiency cooling — are directly in the crosshairs,” Gogia noted. “So are quantum computing R&D efforts and high-reliability storage systems where thermal and magnetic materials matter.”
China, responsible for 70% of global rare earth mining output and 87% of refined supply, poses a serious threat to enterprise IT hardware supply chains with these restrictions — especially for companies with AI-optimized server lines.
AI chip production under threat
The impact on semiconductor manufacturing comes at a critical time when enterprise demand for AI chips is soaring. Companies including Nvidia, AMD, Intel, and TSMC rely on rare earth elements during the manufacturing of advanced chips.
“We see the greatest exposure in private data center expansion projects, AI inferencing at the edge, and next-gen device manufacturing, including specialized industrial IoT and robotics,” noted Gogia.
Major cloud providers have been aggressively expanding their AI compute capacity, with substantial hardware refreshes planned for late 2025. These plans may now face delays or cost increases as chip manufacturers grapple with supply constraints.
Pricing pressures to be felt in 3-6 months
The immediate impact is expected to be limited as manufacturers work through existing inventory, but pricing pressure could emerge within 3-6 months, experts feel.
“The real impact timeline begins within 3–6 months, especially as existing inventory buffers are exhausted,” Gogia pointed out. “Pricing pressure on affected components is likely to emerge even earlier as manufacturers hedge against tightening access.”
Mukesh Ranjan, vice president at Everest Group, characterizes this as a “high-severity development, comparable to the semiconductor shortages of 2020 and 2021.”
“CIOs should expect early signals such as extended lead times and rising component prices by late 2025, with more significant impacts into 2026,” Ranjan said. “Hardware-intensive initiatives will need proactive sourcing and budget contingencies.”
CIOs should integrate these considerations into their technology roadmaps and budget planning, Gogia added.
The geopolitical chess game intensifies
According to Greyhound Research’s Gogia, it is no coincidence this announcement follows moves by the US and its allies to ringfence semiconductor capabilities through the “Chip 4” alliance and deepen their rare earth supply diversification. “China is signalling that any attempt to isolate its position in core technology stacks will be met with asymmetric friction in return.”
The new controls explicitly reference China’s national security interests and leverage the country’s resource advantages in global technology competition.
“Geopolitics is no longer just a backdrop — it is now a full-time actor in enterprise IT strategy,” Gogia added. “China’s move on rare earths formalizes that shift.”
China’s history of rare earth leverage
This is not the first time China has used its rare earth dominance as a geopolitical tool. On December 3, 2024, China halted exports of several key materials used in semiconductors, electronics, and other technologies to the US.
In 2021, China consolidated its rare earth industry into a state-owned enterprise. In 2019, China threatened similar restrictions during the first Trump administration’s trade war. In 2010 too, China restricted rare earth exports to Japan during a territorial dispute, triggering global concern and prompting Japan to invest in alternative sources.
“This isn’t just about tit-for-tat retaliation — it’s a layered play,” explained Gogia. “We believe this is part of a broader shift in China’s posture — from being a passive node in global tech supply chains to becoming an active economic gatekeeper.”
The current restrictions represent the most significant targeting of IT-specific rare earth applications to date, potentially affecting a much broader range of technology companies.
Source:: Network World