The Biden administration announced new restrictions on China’s access to U.S. semiconductor technology, adding measures aimed at stopping Beijing’s push to develop its own chip industry and advance the country’s military capabilities.
The new measures will include restrictions on the export of some types of chips used in artificial intelligence and supercomputing and also tighten rules on the sale of semiconductor manufacturing equipment to any Chinese company.
Washington is looking to ensure that Chinese companies don’t act as a conduit for the transfer of technology to their country’s military — and that chipmakers there don’t develop the capability to make advanced semiconductors themselves.
China “has poured resources into developing supercomputing capabilities and seeks to become a world leader in artificial intelligence by 2030,” said Assistant Secretary of Commerce for Export Administration Thea D. Rozman Kendler. “It is using these capabilities to monitor, track, and surveil their own citizens, and fuel its military modernization. Our actions will protect U.S. national security and foreign policy interests while also sending a clear message that U.S. technological leadership is about values as well as innovation.”
The new rules are coming at a difficult time for the chip industry, which is suffering a steep drop in demand for personal-computer and smartphone components. Shares of many of the world’s biggest semiconductor makers tumbled on Friday following reports that the slump may be even worse than thought.
When the new rules come into force, it will be harder for providers of chips used in Chinese supercomputers and supercomputer-related gear to get permission to fill orders. They should presume requests will be denied, according to senior Commerce Department officials.
Commerce also put a raft of restrictions on supplying U.S. machinery that’s capable of making advanced semiconductors. It’s going after the types of memory chips and logic components that are at the heart of state-of-the art designs.
While there will be more latitude for overseas companies needing technology for their own operations in China — or for parties that can prove they’re making things there for immediate export elsewhere — Commerce said it will enforce the rules and also cut off support for existing deployments of machinery covered by the restrictions.
The U.S. is home to the biggest block of companies that design vital electronic components — and provide the complex machinery needed to manufacture them — but other regions have capabilities that could undermine some of the government’s efforts.
Commerce Department officials acknowledged that overseas cooperation is necessary to avoid hampering the initiatives and said there are talks with other parties underway around the world on the topic. The officials declined to characterize how advanced the negotiations are or how likely they are to result in similar actions in key countries, such as the Netherlands and Japan.
Separately, Commerce added more names to a list of companies that it regards as “unverified,” meaning it doesn’t know where their products end up being used. The 31 additions are all Chinese. That indicates that U.S. suppliers will face new hurdles in selling technologies to those entities.
The biggest name to be added to the list is Yangtze Memory Technologies Co. The memory-chip maker is widely regarded as being the best bet China has of breaking through into the front ranks of the industry and has made progress with advanced products for chip-based storage.
The moves are the next step in trying to break the link between Chinese companies and their country’s military and security apparatus.
The Semiconductor Industry Association, a lobbying group representing all of the largest U.S. chipmakers, said it’s evaluating the impact of the new export controls and will ensure compliance with the restrictions. “We understand the goal of ensuring national security and urge the U.S. government to implement the rules in a targeted way — and in collaboration with international partners — to help level the playing field and mitigate unintended harm to U.S. innovation,” the association said in a statement.
Anyone receiving the unverified designation has to submit to checks on where their products go. While that process is underway, anyone who supplies them with U.S. technology will be required to go through extra certification steps related to the use of the products.
Successfully proving they’re not breaking rules allows the companies to be removed from the list. Not doing so — or failing to cooperate — risks putting them on the so-called entity list, meaning that U.S. technology exports to them are subject to prior approval by the Commerce Department.
Bloomberg reported this week that the administration was readying new restrictions, part of a broader strategy that also includes bolstering domestic chip production. Earlier this year, Biden signed a bill that promises to infuse about $52 billion into the U.S. semiconductor industry.
A sustained rally in chip stocks hasn’t materialized. Financial disclosures from Samsung Electronics Co. and Advanced Micro Devices Inc. this week indicated a slowdown in future sales. The Philadelphia Stock Exchange Semiconductor Index is down 39% this year and fell as much as 4.6% on Friday.
