Oct 7 (Reuters) – The Biden administration on Friday unveiled a wide-ranging set of export controls, including a measure to cut off China from some semiconductor chips made anywhere in the world with U.S. equipment, greatly expanding its reach in an attempt to slow the technology growth of Beijing and military achievements.
The rules, some of which take effect immediately, are based on restrictions sent in letters earlier this year to leading instrument makers KLA Corp ( KLAC.O ), Lam Research Corp ( LRCX.O ) and Applied Materials Inc ( AMAT .O), effectively requiring them to stop supplying equipment to wholly Chinese-owned factories producing advanced logic chips.
A series of measures could lead to the biggest shift in US policy on supplying technology to China since the 1990s. If effective, they could disrupt China’s chip industry by forcing American and foreign companies that use American technology to end support for some of China’s leading chip factories and designers.
Register now for FREE unlimited access to Reuters.comRegister
“This will set the Chinese back years,” said Jim Lewis, a technology and cybersecurity expert at the Center for Strategic and International Studies (CSIS), a Washington-based think tank, who said the policies were a return to the strict regulations of the height of the Cold War. .
“China is not going to give up chip manufacturing … but it will really slow them (down).”
At a briefing with reporters Thursday to preview the rules, senior government officials said many of the measures are aimed at preventing foreign firms from selling advanced chips to China or supplying Chinese firms with tools to make their own advanced chips. They admitted, however, that they had received no promises that Allied nations would implement similar measures and that discussions with those nations were ongoing.
“We understand that the unilateral controls we’re putting in place will lose effectiveness over time if other countries don’t join us,” one official said. “And we risk damaging U.S. technology leadership if foreign competitors are not subject to similar scrutiny.”
The expansion of US powers to control exports to China of chips made with US tools is based on an extension of the so-called foreign direct product rule. It was previously extended to give the U.S. government the power to control exports of foreign-made chips to Chinese telecommunications giant Huawei Technologies Co Ltd ( HWT.UL ), and later to stop the flow of semiconductors to Russia after the incursion her in Ukraine.
On Friday, the Biden administration applied the expanded restrictions to China’s IFLYTEK, Dahua Technology and Megvii Technology, companies added to the entity list in 2019 over allegations that they helped Beijing suppress its Uyghur minority group.
The rules published on Friday also block the supply of a wide range of chips for use in Chinese supercomputer systems. The rules define a supercomputer as any system with more than 100 petaflops of computing power within 6,400 square feet of floor space, a definition that two industry sources said could also hit some commercial data centers at Chinese tech giants.
Eric Sayers, a defense policy expert at the American Enterprise Institute, said the move reflects a new drive by the Biden administration to limit China’s advances rather than simply seek to level the playing field.
“The scope of the rule and the potential impacts are quite staggering, but the devil, of course, will be in the details of implementation,” he added.
Companies around the world began to grapple with the latest U.S. action, with shares of semiconductor equipment makers falling.
The Semiconductor Industry Association, which represents chipmakers, said it was examining the regulations and urged the United States to “enforce the rules in a targeted manner — and in cooperation with international partners — to help level the playing field.”
Earlier on Friday, the United States added top Chinese memory chip maker YMTC and 30 other Chinese entities to a list of companies that US officials cannot inspect, ratcheting up tensions with Beijing and starting a 60-day clock that could triggered much tougher sanctions. Read more
Companies are added to the nonvetted list when U.S. officials cannot conduct on-site visits to determine whether they can be trusted to receive sensitive U.S. technology, forcing U.S. suppliers to take greater care when shipping to them .
Under a new policy announced Friday, if a government prevents U.S. officials from conducting site inspections of companies placed on the non-verified list, U.S. authorities will begin the process of adding them to the entity list after 60 days.
Listing YMTC as a legal entity would escalate already rising tensions with Beijing and force US suppliers to seek hard-to-obtain licenses from the US government before supplying them with even the most low-tech products.
The new regulations will also severely limit exports of U.S. equipment to Chinese memory chip makers and formalize letters sent to Nvidia Corp ( NVDA.O ) and Advanced Micro Devices Inc ( AMD ) ( AMD.O ) restricting shipments to China of chips used in supercomputer systems that nations around the world rely on to develop nuclear weapons and other military technology.
Reuters was the first to report key details of the new restrictions on memory chip makers, including a reprieve for foreign companies operating in China and moves to expand restrictions on Chinese supplies of technology from KLA, Lam, Applied Materials, Nvidia and AMD.
Register now for FREE unlimited access to Reuters.comRegister
Reporting by Stephen Nellis in San Francisco and Karen Freifeld in New York Additional reporting by David Shepardson in Washington Editing by Alexandra Alper, Chris Sanders, Matthew Lewis and Richard Chang
Our standards: The Thomson Reuters Trust Principles.
Add Comment