U.S. to Tighten Chip Tech Exports to China, Exempting Key Allies
Biden administration plans new semiconductor export controls targeting Chinese chipmakers, excluding allies. The rule aims to limit advanced chip technology access while maintaining diplomatic relations.
The Biden administration is set to introduce a new rule in August 2024, expanding U.S. authority over semiconductor manufacturing equipment exports to Chinese chipmakers. This move is part of ongoing efforts to restrict China's access to advanced chip technology, which began in 2022 and 2023.
Key allies in the semiconductor industry, including Japan, the Netherlands, and South Korea, will be exempt from these restrictions. This exemption significantly limits the rule's impact on major chip equipment manufacturers such as ASML and Tokyo Electron.
The new regulation, an extension of the Foreign Direct Product rule, targets approximately six Chinese fabrication plants at the forefront of China's most sophisticated chipmaking endeavors. It will affect exports from several countries, including Israel, Taiwan, Singapore, and Malaysia.
The global semiconductor market, valued at over $500 billion in 2023, has become increasingly critical in modern technology since its inception in 1960. The industry's supply chain is highly globalized, with different countries specializing in various aspects of production.
In response to the impending export control package, a Chinese foreign ministry spokesperson criticized U.S. efforts:
"Containment and suppression cannot stop China's development, but will only enhance China's determination and ability to develop its scientific and technological self-reliance."
The Foreign Direct Product rule, a key component of U.S. export control strategy, allows the U.S. government to restrict sales of products made using American technology, even if manufactured abroad. This rule has previously been applied to limit chip supplies to Huawei, a Chinese tech giant.
Additional measures in the export control package include:
1. Lowering the threshold of U.S. content that subjects foreign items to U.S. control
2. Adding approximately 120 Chinese entities to the restricted trade list
3. Designating about six chipmaking factories as restricted entities
These actions aim to impede supercomputing and AI breakthroughs that could potentially benefit the Chinese military. However, the U.S. is treading carefully to maintain diplomatic relations with allies, recognizing the importance of multilateral support in effective export controls.
The semiconductor industry faces various challenges and opportunities, including environmental concerns due to high water and energy consumption, increasing demand driven by AI and quantum computing, and the need for specialized chips for emerging technologies like 5G and IoT.
As the rule remains in draft form, changes may occur before its publication. The market has reacted positively to the news, with shares of major chip equipment manufacturers surging. This response reflects the complex interplay between geopolitics, technology, and global trade in the semiconductor industry.
