The United States moves to tighten these control restrictions on chip exports have prompted concern and led to a decline in chip-related stocks in Asia
The United States is set to intensify its efforts to curb China’s access to advanced semiconductors and chipmaking equipment, a move aimed at preventing China from acquiring cutting-edge technologies with potential military applications.
The new regulations are expected to be published this week. These regulations are presumed to close gaps and refine restrictions introduced in October of the previous year. The Biden administration will bolster controls on the sale of graphics chips used for artificial intelligence applications and advanced chip-making machinery to Chinese companies.
To deter Chinese firms from circumventing export restrictions by routing shipments through other countries, the United States will implement additional checks. Furthermore, it will add Chinese chip design companies to a trade restriction list, necessitating that overseas manufacturers obtain US licenses to fulfill orders from these firms.
The original chip restrictions were announced a year ago as a robust effort to limit China’s technological progress, an action that was argued by the Biden administration as essential for national security. China reacted unfavourably to these restrictions and accelerated its investments in building domestic capability.
The US move to tighten these control restrictions on chip exports has prompted concern and led to a decline in chip-related stocks in Asia, with companies like Tokyo Electron Ltd., Disco Corp., Advantest Corp., and Hana Micron Inc. all experiencing stock declines. The Biden administration faced criticism over perceived inadequacies in the initial export controls.
The United States revealed the original restrictions before securing the support of its important allies, including Japan and the Netherlands. This allowed the chip equipment companies in these countries to continue supplying advanced equipment to Chinese customers, aiding China’s development of domestic tech capabilities. The US is still navigating its response to this issue.
Additionally, the update comes after the discovery of a Chinese-produced advanced 7-nanometer processor in a Huawei smartphone, indicating China’s capabilities beyond the capabilities that the United States sought to prevent.
The constantly changing situation showcases the challenges of hindering Beijing’s technological ambitions and has driven political pressure on the Biden administration to impose more sanctions on Huawei and its chipmaking partner, Semiconductor Manufacturing International Corp. The US is now conducting a formal investigation into the Huawei phone.
Some companies have objected to the Biden administration’s strategy. Notably Peter Wennink, the CEO of Dutch chip equipment leader ASML Holding NV, publicly opposed the measures and warned of the development of competing technology by Chinese companies. United States firms like Nvidia Corp have also questioned the long-term efficiency of trade restrictions.
However, the Biden administration aims to address pending issues with the updated roles, especially in the areas of AI and shipments through third-party countries. The new controls will affect the graphics chips used as accelerators in data centers for AI training. The parameters for exporting these chips to China will be adjusted. Meanwhile, restrictions will be placed on certain chip shipments to overseas subsidiaries and affiliates of Chinese firms, and licenses will be required to export restricted exports to intermediary countries.
To accommodate the semiconductor industry’s need to access the world’s largest chip market, the new rules will allow companies to export nearly all consumer graphics chips to China. They will need to notify the US government before shipping a select few leading-edge consumer chips.
Furthermore, the United States will issue a request for comment to assess potential national security risks and possible solutions regarding Chinese companies’ access to United States or allied cloud computing services.
Waivers have also been extended to companies like Samsung Electronics Co., Taiwan Semiconductor Manufacturing Co., and SK Hynix Inc., allowing them to continue shipping restricted chipmaking technology to their facilities in China.
The updated regulations reflect the ongoing efforts to manage the impact of advanced technology exports on national security and geopolitics.