Oct 7 (Reuters) – The Biden administration on Friday released a sweeping set of export controls, including a move to cut off China from certain semiconductor chips made anywhere in the world with U.S. equipment, vastly expanding its reach in its attempt to curb Beijing’s technology. and military advances.
The rules, some of which take effect immediately, build on restrictions sent in letters earlier this year to major toolmakers KLA Corp ( KLAC.O ), Lam Research Corp ( LRCX.O ) and Applied Materials Inc (AMAT.O), effectively. forcing them to stop shipments of equipment to wholly Chinese-owned factories that produce advanced logic chips.
The series of measures could mark the biggest shift in US policy toward sending technology to China since the 1990s. If effective, they could cripple China’s chipmaking industry by forcing US and foreign companies that use US technology to cut support for some of China’s biggest factories and chip designers.
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“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, DC-based think tank, who said the policies date back to the strict regulations of the height of the Cold War.
“China isn’t going to give up chipmaking … but this is going to really hold them back.”
At a briefing with reporters Thursday where the rules were previewed, senior government officials said many of the measures were aimed at preventing foreign companies from selling advanced chips to China or supplying Chinese companies with tools to manufacture their own advanced chips. They admitted, however, that they had not secured any promises that Allied nations would implement similar measures and that discussions with those nations are ongoing.
“We recognize that the unilateral controls we are putting in place will lose effectiveness over time if other countries do not join us,” one official said. “And we risk undermining America’s technological leadership if foreign competitors are not subject to similar controls.”
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 authority to control exports of foreign-made chips to Chinese telecom giant Huawei Technologies Co Ltd ( HWT.UL ) and later to stop the flow of semiconductors to Russia after his invasion of 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 released Friday also block shipments of a wide range of chips for use in Chinese supercomputing systems. The rules define a supercomputer as any system with more than 100 petaflops of computing power within an area of 6,400 square feet, a definition that two industry sources said could also affect some commercial data centers of Chinese tech giants .
Eric Sayers, a defense policy expert at the American Enterprise Institute, said the move reflects a new bid by the Biden administration to contain China’s advances rather than simply seeking 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 implementation details,” he added.
Businesses around the world began to struggle with the latest US action, with shares of semiconductor manufacturing equipment makers falling.
The Semiconductor Industry Association, which represents chipmakers, said it was studying the regulations and urged the United States to “implement the rules in a targeted manner — and in collaboration with international partners — to help level the playing field.”
Earlier Friday, the U.S. added China’s top memory chip maker YMTC and 30 other Chinese entities to a list of companies that U.S. officials cannot inspect, raising tensions with Beijing and starting a 60-day clock that could lead to much harsher penalties. Read more
Companies are added to the non-verified list when U.S. authorities are unable to complete on-site visits to determine whether they can be trusted to receive sensitive U.S. technology, forcing U.S. suppliers to be more careful when sending them.
Under a new policy announced Friday, if a government prevents U.S. officials from conducting site checks on companies placed on the unverified list, U.S. authorities will begin the process to add them to the blacklist. entities after 60 days.
The YMTC entity list would heighten already growing tensions with Beijing and force its American suppliers to seek hard-to-obtain licenses from the US government before shipping even low-tech items to them.
The new regulations will also severely restrict the export 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 supercomputing. systems that nations around the world rely on to develop nuclear weapons and other military technologies.
Reuters was the first to report key details of the new restrictions on memory chip makers, including compensation for foreign companies operating in China and moves to expand restrictions on shipments to China of KLA technologies, Lam, Applied Materials, Nvidia and AMD.
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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
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