TSMC’s Rare Earth Inventory Is Sufficient for “One to Two Years,” but Long-Term Risks Still Remain

Taiwan Semiconductor Manufacturing Company (TSMC) has confirmed that its rare earth material inventory is currently sufficient for the next one to two years, according to a report from DigiTimes. However, company executives cautioned that long-term supply risks remain, especially amid ongoing geopolitical tensions and China’s export controls on critical raw materials.

TSMC Senior Vice President and co-Chief Operating Officer Cliff Hou addressed growing concerns surrounding rare earth supply chain stability, explaining that the company faces no immediate risks due to its well-managed inventory and supplier readiness. Hou noted that while short-term effects appear limited, the situation could worsen if China continues tightening export policies on these strategic materials.

“Concerns about rare earths have been going on for some time now,” Hou stated. “The short-term direct impact remains relatively low, and our suppliers currently have sufficient inventory.”

The semiconductor industry’s reliance on rare earth elements is significant. These materials are essential for chip fabrication equipment, particularly in polishing processes, lithography systems, and magnet-based machinery used by key suppliers such as ASML and Tokyo Electron. While TSMC’s own operations are not directly reliant on large quantities of rare earths, its supply ecosystem could still face disruption if availability tightens further.

Analysts have warned that a prolonged restriction could slow down advanced node production, especially in facilities supporting U.S.-based clients, if China imposes additional licensing or quota-based export policies on key minerals. Such measures could indirectly influence TSMC’s overseas manufacturing capabilities, including those in the United States and Japan.

To mitigate these risks, TSMC is diversifying its sourcing strategy. Hou confirmed that the company is exploring alternative suppliers in Australia and other regions, though he acknowledged that many of these markets still lack the mature infrastructure and production scale needed to fully replace Chinese sources in the near future.

While current stockpiles provide some breathing room for TSMC, the long-term outlook depends heavily on global trade negotiations and U.S.-China relations. Experts suggest that any escalation in export restrictions could reshape the semiconductor material supply chain, pushing major foundries and equipment manufacturers to accelerate localization and resource diversification efforts.

At present, the situation remains stable but uncertain, with most of the industry adopting a cautious stance while monitoring geopolitical developments closely. For now, TSMC’s position remains secure, but ensuring continued access to these critical materials will be one of its biggest strategic challenges moving forward.

Do you think TSMC can successfully diversify its rare earth supply chain away from China, or will dependency remain inevitable in the near term? Share your thoughts below.