Datacenters face direct hit from China rare earth curbs, as clock runs out on escalated licensing chokeoff
China’s rare-earth export controls could soon disrupt datacentre supply chains, particularly for components relying on yttrium and erbium. The issue matters because these materials are used in optical networking, displays, capacitors and other electronics, while Beijing must decide in November whether to maintain or reinstate stricter licensing rules.
Yttrium exports from China are reportedly down about 75 per cent compared with 2025, and China processes all mined yttrium ore into usable forms while supplying all erbium oxide, according to IEEE Spectrum. Tougher controls, suspended for 12 months after US–China trade talks in November 2025, could be extended to more materials; US initiatives including investments, international agreements and a planned strategic reserve may reduce dependence eventually, but are unlikely to offer immediate relief.
- China’s rare-earth controls may affect datacentre equipment supplies.
- Yttrium exports are reportedly down 75 per cent.
- November’s policy decision could tighten the supply squeeze.
Both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
China can reasonably argue that rare earths are strategic, finite resources and that export licensing is a legitimate means of protecting national security, enforcing environmental and traceability standards, and ensuring domestic industry has reliable access. Supporters may also see the controls as a proportionate response to foreign restrictions on advanced technology, intended to encourage more balanced and resilient global supply chains rather than leave processing concentrated in China without reciprocal safeguards. This view prioritises sovereignty and the right of a major producer to manage strategically important materials.
The case against
Critics can reasonably argue that sharply restricting exports of materials for which China has near-total processing capacity risks turning commercial interdependence into political leverage. Datacentres, communications networks and other civilian infrastructure may face disruption despite having little ability to replace yttrium or erbium supplies quickly, while licensing uncertainty deters investment and raises costs worldwide. This view prioritises predictable trade rules, supply-chain reliability and avoiding harm to businesses and users caught in wider geopolitical disputes.