Datacenters face direct hit from China rare earth curbs, as clock runs out on escalated licensing chokeoff

The IEEE is warning that China’s export controls on rare earth minerals could start to impact datacenters, as shipments of some key materials are down 75 percent and Beijing is due to review its policies this November. The techie org's official publication, IEEE Spectrum, focuses on two rare earths in particular, erbium and yttrium, which are used in components for IT equipment. Exports of yttrium are down by about 75 percent this year in comparison with 2025. Yttrium was one of seven medium and heavy rare earth elements that China placed under mandatory licensing in its first wave of restrictions in 2025. Yttrium is used in white LED lights and displays, microwave filters, and solid-state lasers, and also in ceramic capacitors found in pretty much all electronic kit. Erbium is used in the amplifier circuits that boost optical signals in fiber-optic links. The Chinese government enacted restrictions on the overseas sale of rare earth minerals last April, as reported by The Register. This was part of retaliatory measures against the Trump administration’s slapdash trade tariffs. It upped the ante later in the year with tougher measures, including laws that require companies to apply for a license before they ship any goods containing rare earths sourced in China to anywhere in the outside world. This latter rule is a mirror of US laws like those used to block the export of ASML chipmaking equipment to China. That second wave of measures – which was to have included increased export controls of five new elements including erbium – was suspended in November 2025 for 12 months, following trade talks between the US and China. When the year is up this November, Beijing will decide whether to drop the tougher measures or re-apply them, perhaps extending them to all or most of the rare earth minerals it controls. According to the International Energy Agency (IEA), the supply of rare earths remains among the least geographically diversified among all critical minerals. For those minerals used in magnets, China accounted for about 60 percent of global mining output in 2024, and its dominance is even greater in the separation and refining stages, making up about 91 percent of global production. But for yttrium and erbium used in IT kit, China is effectively the sole source, IEEE Spectrum claims. The country mines 90 percent of the world’s yttrium, but it processes all of the world’s mined ore into an industrially usable form such as yttrium oxide, and likewise supplies all erbium oxide. Washington has been taking some steps to try and offset China’s virtual monopoly of key rare earth materials. Recently, the US Department of Defense announced a $750 million investment to secure supplies of rare earth elements for magnets from a production site in central Brazil, while the Department of Energy announced $500 million for seven selected projects to expand critical mineral and material processing, battery manufacturing, and recycling. The US signed agreements with representatives of 54 countries at the 2026 Critical Minerals Ministerial meeting in February this year, as well as talking up commitments to build secure and resilient supply chains for such materials. Also in February, President Trump launched Project Vault, a supply chain security initiative establishing an American Strategic Critical Minerals Reserve stockpile, with funding of up to $10 billion from the federal Export-Import Bank of the United States. But many of these initiatives will take time to have any impact, and China’s impending decision will put these to the test, should it decide to take a tougher stance. Relations between Washingon and Beijing remain strained because of trade and other factors, and a lot could be riding on a summit between President Trump and President Xi Jinping next month. ®

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