On October 9, 2025, China announced expanded restrictions on exports of certain rare earth elements and related technologies, specifically targeting defense end-use (which will be denied) and semiconductors (subject to case-by-case licensing). It also added holmium, erbium, thulium, europium, and ytterbium to its list of controlled elements.

Reuters describes this as a strategic move leveraging China’s dominance in rare earth processing/export.¹

The Guardian frames it as a “national security” measure aimed at shielding China’s global leverage in magnets, chips, and defense systems.²

These new limits build on earlier restrictions (starting in 2023–2024) on gallium, germanium, and graphite and expand the toolkit Beijing uses to regulate critical supply chains.³

🧪 Rare earths and related materials: What they are, how they’re used in semiconductor & defense chains

Key materials under pressure

1. Neodymium (Nd), Praseodymium (Pr), Dysprosium (Dy), Terbium (Tb), Samarium (Sm), Gadolinium (Gd), Lutetium (Lu), Scandium (Sc), Yttrium (Y), etc. — medium & heavy rare earths used in magnets, optics, ceramics, and specialty alloys.
2. Newly targeted: Holmium (Ho), Erbium (Er), Thulium (Tm), Europium (Eu), Ytterbium (Yb) — used in lasers, luminescent materials, fiber amplifiers, specialty glasses.
3. Gallium (Ga) and Germanium (Ge): Though not “rare earths,” they are frequently tied to export controls already; used in GaN / GaAs power/RF devices, photonics, SiGe, and optoelectronics.⁴
4. Graphite: Critical in high-thermal conductivity materials, battery anodes, thermal interface systems, and other advanced packaging parts. Already under scrutiny.⁵

China’s dominance is most acute in refining, separation, and magnet-making — even if raw ores are globally dispersed.⁶

Where they show up in the semiconductor / equipment value chain

1. CMP / planarization slurries: Cerium oxide (ceria) is used for chemical-mechanical polishing in wafer fabrication.
2. Optics, lenses, lasers, and metrology tools: Rare earth-doped glasses, ceramics, and laser media (Er, Y, Tm, Ho) are common in high-end lithography, inspection, and repair systems.
3. Motion & actuation systems: Precision motors, stages, robotics (in tools & wafer handling) use NdFeB permanent magnets (often with Dy/Tb for thermal stability).
4. RF / power / photonics: GaN / GaAs devices (power amplifiers, RF front ends), SiGe or Ge photonics, and fiber amplifiers rely on gallium, germanium, and rare-earth dopants.
5. Defense hardware & subsystems: Radar arrays, guided munitions, actuators, control mechanisms, and power systems embed rare earth magnets, specialty ceramics, and advanced alloys.

🎯 Impact on U.S. Defense Sector

When China’s policy explicitly denies “defense end-use” licensing, the consequences are immediate and structural.

1. Actuators, gimbals, sensors, seekers: Use NdFeB + Dy/Tb magnets for high torque, precision movement, and thermal stability. Restrictions raise cost, lead time, or force redesign.
2. Radar, EW, missile systems: Depend on GaN RF power devices, rare earth ceramics for antenna materials, and precision optics for sensor systems.
3. Platform modernization & sustainment: Submarines, aircraft, UAVs, missiles, and guided systems all contain rare earth elements; supply disruption threatens readiness.
4. The U.S. Department of Defense is actively working on a “mine-to-magnet” domestic supply chain to reduce reliance on foreign processing.⁷

Visual Capitalist and other analyses map out approximate tonnes of rare earth material in major U.S. defense platforms.⁸

🖥️ Effects on GPUs, AI chips and commercial semiconductors

You won’t find neodymium or erbium inside a GPU die — but the manufacturing ecosystem is deeply intertwined with rare earth supply.

1. Tooling & manufacturing throughput: Limits on rare earths used in CMP, optics, motors/stages, robotics, etc., slow down fab productivity. This indirectly constrains GPU / chip wafer output.
2. Thermal and packaging materials: Graphite and specialty materials used in cooling subsystems, TIMs, and substrate materials may face supply stress.
3. Support infrastructure (power, connectivity, RF): AI systems, data centers, and edge devices use GaN / photonics / fiber amplifiers. Restrictions on Ga/Ge make upstream subsystems more expensive or delayed.
4. Lead times & cost inflation: Tighter material flows = higher risk premiums, stockpiling, longer qualification cycles, and higher costs — all of which ultimately reach chip and system prices.

⏳ Timeline & exposure risk

1. Short term (0–6 months): Licensing uncertainties → export approvals delayed, backlog in magnet, optics, and gallium/germanium supply.
2. Mid term (6–18 months): Programs begin experiencing schedule slip; alternative suppliers may not match quality or scale.
3. Long term (2+ years): Reconfigured supply chains, domestic or allied processing ramps, alternative material development, recycling systems become strategic.

🛡️ Mitigation & strategic playbook

1. Qualify alternate suppliers now: Pre-qualify ceria slurries, magnet subassemblies, and non-Chinese optics.
2. Design for material flexibility: Reduce reliance on heavy rare earths in magnet designs, explore lower-Dy/Tb formulations, or hybrid actuation.
3. Invest in domestic / allied processing capacity: Use government incentives, DPA tools, and long-term contracts to underwrite new separation, magnet, and rare-earth foundry plants.
4. Recycling & circularity: Recover Dy/Tb, Nd, and rare earths from end-of-life magnets and systems to close supply loops.
5. Strategic stockpiles: Maintain buffer stocks for mission-critical programs to insulate against short-term licensing or supply shock.

✅ Bottom line

China’s expanded control over rare earths is more than trade policy — it is supply-chain leverage. While a GPU die may not be made of rare earths, the factories and subsystems that produce, package, cool, and connect those chips absolutely are. For U.S. defense, the stakes are even higher: denial of defense end-use licensing makes this a readiness, cost, and schedule issue — not just a materials one.

Getting ahead means securing alternate supply chains, qualifying substitutes, and rethinking designs today — because tomorrow’s battles (commercial or geopolitical) may depend on who controls the magnet, the laser, the slurries, and the GaN amplifiers.

¹ Reuters: China tightens rare earth export controls, targets defence, semiconductor users

² The Guardian: China steps up control of rare-earth exports citing 'national security' concerns

³ CSIS: The Consequences of China’s New Rare Earths Export Restrictions

⁴ ORF / research review: China’s Critical Mineral Export Controls: Background & Chokepoints

⁵ AheadOfTheHerd: Graphite’s Criticality Equals or Exceeds Rare Earths

⁶ Reuters: What to know about China’s rare earth export controls

⁷ U.S. DOD: DOD Looks to Establish ‘Mine-to-Magnet’ Supply Chain

⁸ Visual Capitalist: Visualizing How Rare Earths Power U.S. Defense