TSMC is actively requesting that its equipment suppliers provide motors that do not utilize rare-earth magnets. This initiative is a response to China's control over the global supply chain for materials such as neodymium, dysprosium, and terbium, which are essential for high-performance industrial machinery.
China currently accounts for approximately 70% of global rare-earth mining and controls about 95% of the finished permanent magnets used in manufacturing equipment. In April 2025, Beijing implemented export controls on several rare earths, requiring case-by-case approval for shipments to international manufacturers.
The restrictions were expanded in October 2025 to include additional rare earths and processing technologies, though the expansion was suspended until November 2026, with a subsequent 90-day extension. TSMC aims to mitigate potential production disruptions caused by these regulatory hurdles.
To replace rare-earth magnets, the company is evaluating alternative motor technologies, including induction motors, switched-reluctance motors, and motors utilizing ferrite magnets. These alternatives involve trade-offs in power density, efficiency, and operational precision.
Taiwan is working with the United States to develop independent supply chains for critical minerals. The Taiwanese government plans to establish a pilot production line via the Industrial Technology Research Institute within three years, aiming to meet 50% of domestic demand.
