TSMC Seeks Factory Motors That Avoid Rare-Earth Magnets
TSMC is asking suppliers about automation equipment with motors that avoid rare-earth magnets, aiming to limit production risks from concentrated material supply chains.
TSMC is asking equipment suppliers whether they can provide factory automation machinery with motors that don’t depend on rare-earth magnets. The move targets a practical vulnerability: a shortage of specialized motor components could complicate maintenance, equipment upgrades or new production capacity, even when the other materials needed to make chips are available.
A Reuters report published October 22, citing people familiar with the matter, says the Taiwanese chipmaker has begun exploring alternatives with its suppliers. TSMC is the world’s largest contract chip manufacturer, producing chips for Nvidia, Apple, Broadcom, Qualcomm and companies across the technology and automotive industries. Its factories rely heavily on automated equipment, making the availability of motor parts a supply-chain concern with potential consequences for day-to-day operations.
Why motor magnets matter
Many industrial motors use powerful permanent magnets made with rare-earth elements, including neodymium, dysprosium and terbium. These materials help motors deliver useful combinations of power and size. That makes them valuable in machinery where compact components and reliable motion matter, including the automation equipment used in semiconductor fabrication plants.
The supply chain for these materials is concentrated. The U.S. Geological Survey estimates that China accounts for roughly 70% of global rare-earth mining. The International Energy Agency puts China’s share at around 90% of refining and approximately 95% of finished permanent magnets. Those figures help explain why an interruption to exports can matter far beyond the mining sector: manufacturers may rely on processed materials and finished components from the same concentrated supply base.
In April 2025, China placed seven medium and heavy rare earths, along with magnets made from them, under export controls. Exporters were required to seek approval and licenses on a case-by-case basis. The measures affected shipments to manufacturers in the U.S., Europe and Asia, including TSMC.
On October 9, 2025, China expanded the measures to cover five more rare earths, processing technology and equipment, and some products made outside China. The expanded rules included products containing more than 0.1% Chinese-origin rare earths or made using Chinese processing technology. China later suspended that October expansion for one year, until November 10, 2026; the suspension was subsequently extended by 90 days. For equipment buyers, the changing terms make it harder to treat component availability as a settled assumption over the life of a factory.
Alternatives come with engineering trade-offs
Several motor designs can operate without rare-earth permanent magnets, but switching involves more than substituting one part for another. Induction motors create torque through electromagnetic induction, while switched-reluctance motors use the tendency of a rotor to align with a magnetic field. Some permanent-magnet motors can instead use ferrite magnets, which don’t rely on rare-earth elements.
Each option changes the engineering equation. Efficiency, physical size, power density, precision and control requirements can differ from those of rare-earth magnet motors. Those differences matter in automated factory equipment, where a motor must fit the machine and meet its performance requirements over sustained operation. A replacement that works in principle may still require changes to equipment design, controls or maintenance routines.
That leaves suppliers with a substantial qualification task. They would need to show that alternative motors can meet the needs of specific machines, and equipment makers would have to assess how any design change affects the larger system. TSMC’s inquiry signals that it is testing the availability of alternatives; the report doesn’t establish that the company has selected a particular motor technology or that suppliers have already delivered replacement equipment.
Building other sources will take time
Changing motor designs addresses one part of the exposure. The wider challenge is building sources for rare-earth materials, processing and finished magnets outside China. Taiwan is reported to be pursuing domestic production capabilities with U.S. cooperation. The Industrial Technology Research Institute is working toward a pilot production line within three years, with a stated aim of supplying about 50% of Taiwan’s domestic rare-earth demand.
The Reuters report also says the U.S. is working with Taiwan and other partners to develop alternative sources, expand processing capacity and strengthen supply chains. In February 2026, the Trump administration announced plans for a $12 billion critical minerals stockpile. These efforts address the broader materials pipeline, but they don’t by themselves resolve the immediate question of which motors can replace rare-earth designs in factory machinery.
For TSMC and its suppliers, the next useful evidence will be concrete: which equipment can use alternative motors, how those designs perform in production settings, and whether suppliers can provide the parts and support needed for repairs and expansion. The inquiry is an early step in reducing exposure. Its practical effect will depend on whether replacement components meet factory requirements and can be sourced reliably.
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