(Reuters) – On Friday, the Biden administration released wide-ranging export controls. These controls include a plan to stop China from getting specific semiconductor chips made worldwide with U.S. equipment. This is a huge step to slow down Beijing’s technological and military advances.
Some of the rules go into effect right away. They add to restrictions that were sent in letters to top toolmakers KLA Corp (KLAC.O), Lam Research Corp (LRCX.O), and Applied Materials Inc (AMAT.O) earlier this year. Those letters told them to stop sending equipment to factories in China that are owned by China and make advanced logic chips.
The group of measures could be the most significant change in U.S. policy towards shipping technology to China since the 1990s. If they work, they could hurt China’s chip manufacturing industry by forcing American and foreign companies that use U.S. technology to stop helping some of China’s best factories and chip designers.
Jim Lewis, a technology and cybersecurity expert at the Center for Strategic and International Studies (CSIS), a think tank in Washington, D.C., said, “This will set the Chinese back years.” He said the policies are similar to the strict rules that were in place during the height of the Cold War. “China will not stop making chips, but this will slow them down.”
Senior government officials gave a preview of the rules to reporters on Thursday. They said that many of the measures were meant to stop foreign companies from selling advanced chips to China or giving Chinese companies the tools they need to make their advanced chips. They admitted that they had not gotten any guarantees that allied countries would take similar steps and that talks with those countries are still going on.
One official said, “We know that the controls we’re putting in place on our own won’t work for long if other countries don’t join us.” “And we risk hurting the U.S.’s position as a leader in technology if foreign competitors don’t have to follow the same rules.”
The so-called “foreign direct product rule” has been changed to give the U.S. more power to stop chips made with U.S. tools from being sent to China. It was expanded in the past to allow the U.S. government to control exports of chips made overseas to Chinese telecoms giant Huawei Technologies Co Ltd (HWT.UL) and later to stop the flow of semiconductors to Russia after it invaded Ukraine.
On Friday, the Biden administration imposed new restrictions on China’s IFLYTEK, Dahua Technology, and Megvii Technology. These companies were added to the entity list in 2019 because of claims that they helped Beijing suppress its Uyghur minority group.
The rules released on Friday also stop shipping a wide range of chips that China wants to use in supercomputers. The authorities say that a supercomputer is any system with more than 100 petaflops of computing power and less than 6,400 square feet of floor space. Two people in the industry said that this definition could also affect some commercial data centres at Chinese tech giants.
Eric Sayers, an expert on defence policy at the American Enterprise Institute, said that the move shows that the Biden administration is now trying to stop China’s progress instead of just trying to make things fair.
“The rule’s scope and possible effects are pretty amazing, but the devil will be in the details of how it’s put into place,” he said. Companies all over the world started to deal with the latest U.S. action. Shares of companies that make equipment for making semiconductors fell.
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The Semiconductor Industry Association, which represents chipmakers, said it was studying the regulations and urged the U.S. to “implement the rules in a targeted way, and in collaboration with international partners, to help level the playing field.”
The United States added China’s top memory chipmaker, YMTC, and 30 other Chinese companies to a list of companies that U.S. officials cannot inspect. This raised tensions with Beijing and started a 60-day clock that could lead to much harsher penalties. Go to site
Companies are put on the “unverified” list when U.S. officials can’t visit them to see if they can be trusted with sensitive U.S. technology. This means that U.S. suppliers have to be more careful when shipping to these companies.
Under a new policy announced on Friday, if a government doesn’t let U.S. officials check out companies on the unverified list, they will be added to the entity list after 60 days.
Tensions with Beijing are already getting worse, and YMTC would make things worse by forcing its U.S. suppliers to get hard-to-get licences from the U.S. government before sending them even the lowest-tech items.
The new rules will also put a lot of restrictions on the export of U.S. equipment to Chinese memory chip makers. Letters have already been sent to Nvidia Corp (NVDA.O) and Advanced Micro Devices Inc (AMD) (AMD.O), telling them they can’t send chips to China that are used in supercomputers that countries around the world use to make nuclear weapons and other military technologies.
Reuters was the first to report on some of the essential details of the new restrictions on memory chip makers. This included a break for foreign companies doing business in China and a move to make it harder for KLA, Lam, Applied Materials, Nvidia, and AMD to send their technologies to China.
South Korea’s industry ministry said on Saturday that there wouldn’t be a significant change in how Samsung (005930. KS) and SK Hynix (000660. KS) get the equipment they need to make chips in China. Still, they did need to talk to U.S. export control authorities to reduce uncertainty.
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