Countering semiconductor and rare mineral shifts successfully

The U.S. is recalibrating two critical areas of its industrial policy with global trade tensions on the rise. Recent reports detail the Trump administration’s attempts to renegotiate CHIPS Act grants to ensure stronger returns on investment. Meanwhile, China’s control over rare earth exports has forced manufacturers around the world to slow their production lines because of critical shortages—even as supplies start to flow again.  

These parallel developments reflect a broader push toward industrial self-sufficiency and supply chain resilience. For companies operating in tech or manufacturing, they are both the latest hurdles and harbingers of changes still to come.  

How CHIPS Act renegotiations affect semiconductor manufacturing

The Trump administration has set its eyes on yet another aspect of semiconductor policy in a move that threatens massive ramifications for the industry: the CHIPS Act. Since it was approved in 2022, the CHIPS and Science Act has resulted in billions of dollars of planned investment in the American chip sector. Grants and project incentives were offered to major players like TSMC, Samsung, SK Hynix, Intel, and Micron, along with a host of smaller manufacturers.  

Now, the White House is “renegotiating” some of those awards. U.S. Commerce Secretary Howard Lutnick said in a recent hearing that some grants “just seemed overly generous, and we’ve been able to renegotiate them.”  

What, exactly, that means is not clear. Lutnick followed the previous statement by saying, “All the deals are getting better, and the only deals that are not getting done are deals that should have never been done in the first place.”  

This reset marks a notable pivot from Washington’s previous subsidy-as-stimulus approach to bolstering the industry. It appears the administration’s goals now go beyond luring major players away from Asia and increasing chip production and research in the U.S. as officials are reportedly trying to “increase the return on taxpayer investment” of the already-awarded grants.

However, the move isn’t exactly a surprise. In February, a Reuters report detailed that U.S. officials sought to alter the awards and that delays in disbursement were likely.

For the many grants signed in 2022 and the days since, disbursements have only started in the past year. While the details of the fund allocations aren’t public, the awards are designed to reward chipmakers with milestone payments as they make progress toward pledged goals related to U.S. investment in research or fab expansions.  

For multinational firms like TSMC and Samsung, both of which received multi-billion-dollar grants for new high-end production facilities on U.S. soil, this change creates a new layer of political and operational complexity. While their presence is undoubtedly a crucial piece of the American chip ecosystem, incentives that were agreed on now may come with tighter accountability mechanisms.  

Lutnick claims TSMC’s case is an example of a successful renegotiation. The Taiwanese chip giant, slated to receive a $6 billion grant, had originally pledged to invest $65 billion in U.S. manufacturing. In March, TSMC announced it would add $100 billion to its original investment. However, it’s unclear whether this move came as a result of CHIPS Act negotiations or was made independently.  

One factor potentially driving these adjustments is the Trump administration’s ambition to ensure that America holds over 50% of the world’s AI computing capacity. This lofty target raises the stakes for CHIPS-funded projects, moving the goalposts to not only focus on physical infrastructure but also strategic control over the future of AI hardware. Export risks, particularly to nations like the UAE, are also under heightened scrutiny thanks to the administration’s decision last month to re-open the market for advanced AI intelligence components. For CHIPS award recipients, this adds further pressure to align with national security objectives.

As funding agreements grow more complex and performance metrics tighten, chipmakers partners will need to demonstrate robust compliance and align their plans with U.S. political ambitions. Meanwhile, industry buyers will need adaptable sourcing strategies to avoid potential disruptions. Sourceability can help clients mitigate risk by identifying optimal U.S.-based partners to strengthen investment commitments and streamline compliance and reporting to satisfy new government expectations.  

China’s rare Earth export restrictions

China’s early-April move to place seven rare earth metals vital for defense, tech, and automotive applications under export controls has sent shockwaves through global supply chains. These metals are essential to the manufacture of, among other end products, magnets used in everything from cars to factory robots. In mid-May, when the U.S. and China reached a temporary trade truce, manufacturers in America and Europe anticipated that China would relax its rules on exports.  

However, just a fraction of the hundreds of export license applications sent to authorities in Beijing have been approved. Some officials claim the Chinese government used the bureaucracy behind the system as a bargaining chip in ongoing trade talks with the U.S.  

On June 11, the two countries found common ground on a new trade framework, which included a commitment from Beijing to resume rare earth metals and magnet exports to the United States. However, two months of disruption have left their mark.  

With rare earth component supplies dwindling in factories around the world, many manufacturers have been forced to slow or halt production entirely. This includes major automakers in the Midwest and South, who rely on the magnets for steering, brake, and fuel systems in their vehicles. Firms making robots for industrial automation have also been forced to delay certain manufacturing lines.  

Compounding the problem is the fact that some rare earth magnet producers in China also slowed their production in response to uncertainty surrounding exports. Those decisions are now rippling through the market. Even with exports resuming, supply remains uncertain and will need time to recover.  

These developments shine a painful light on what many deem the Achilles heel of U.S. manufacturing. Currently, China produces 90% of the world’s rare earth magnets and holds a dominant 70% position in rare earth metal exports. The remainder are mostly produced in Japan and Vietnam for use by domestic companies.  

Meanwhile, American firms are struggling to keep up with the hefty investment required to purify and extract rare earth metals and the high cost of ongoing operations outside of China. One startup, Phoenix Tailings, aims to extract key metals from the leftovers of iron or copper refinement. It plans to open a new facility capable of producing 200 tons of rare earth metals a year. However, most Chinese factories produce this amount every month, meaning American firms are fighting for the smallest sliver of the market.  

For businesses with any degree of reliance on rare earth materials, this episode reinforces the urgency of decoupling supply chains from geopolitical hotbeds. Some countries are turning to fast-growing refineries in Australia. Others are exploring multinational partnerships to reduce dependence on China. But these are long-term efforts. Building new supply networks and infrastructure takes years, and in the meantime, manufacturers without a diverse sourcing strategy remain vulnerable.