TSMC is exploring alternatives to rare-earth components across its factory equipment to curb risks that Beijing’s export controls could disrupt plants manufacturing the world’s most advanced chips, three people familiar with the matter said.

The world’s largest contract chipmaker surveyed automation suppliers on using rare-earth-free motors after China placed certain rare-earth materials, magnets and processing technology under export licensing rules last year.

A shortage of specialised magnets in factory motors threatens chip output for AI systems, smartphones and data centres, though talks remain early and TSMC declined to comment.

Specialised magnets made with rare earths drive precision motors in automated wafer-handling systems and cleanroom equipment. Without these components, high-throughput manufacturing lines ground to a halt, cutting off output bound for smartphone makers, consumer tech brands and data centre operators. TSMC has approached equipment suppliers to gauge whether alternative motor designs can match current production tolerances without relying on Chinese materials.

Talks remain at an early phase and have not triggered wide equipment replacements across operational plants. TSMC declined to comment on vendor communications.

Hardware brands across Asia track fabrication inputs closely because component disruptions cascade rapidly into consumer hardware shortages. A bottleneck in factory machinery slows capacity additions for cutting-edge nodes, lifting wafer costs and tightening component supply for consumer electronics brands already balancing thin margins.

For equipment vendors, redesigning factory tools without rare-earth magnets requires heavy engineering adjustments. Permanent magnets provide the highest torque density for compact industrial robotic arms, meaning substitutions often demand larger machinery footprints or reduced operating speeds.

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