US implements sweeping export rules targeting Chinese chip industry

A sweeping set of export controls was announced Friday by the Biden administration, including measures to cut China off from semiconductor chips made with U.S. equipment, regardless of the country of manufacture, expanding its scope in its attempt to slow down China’s technological and military advances.

The rules, some of which took effect immediately, build on restrictions communicated earlier this year to major toolmakers KLA Corp, Lam Research Corp and Applied Materials Inc, effectively requiring them to stop material deliveries to all-Chinese factories producing advanced logic chips.

These measures could amount to the the biggest change in american politics to shipping technology to China since the 1990s. If effective, they could hamper the Chinese chipmaking industry by forcing US and foreign companies that use US technology to cut support for some leading factories and designers in China.

According to US experts, the new policy could potentially put the Chinese back. Meanwhile, senior government officials explained that many of the measures were aimed at preventing foreign companies from selling advanced chips to China or providing Chinese companies with tools to manufacture their own advanced chips.

No promises were obtained from allied nations, however, that they would implement similar measures, discussions between these nations and the United States are still ongoing. As the Biden administration recognizes that the unilateral controls being implemented will lose effectiveness over time without support from other countries.

The expansion of U.S. powers to control exports to China of chips made with U.S. tools is based on an expansion of the previously expanded so-called Foreign Direct Product Rule to give the U.S. the power to control exports of foreign-made chips to Huawei and later to stop the flow of semiconductors to Russia after its invasion of Ukraine.

The rules released on Friday also block shipments of a wide range of chips for use in Chinese supercomputing systems, defining a supercomputer as any system with more than 100 petaflops of computing power in a 6,400 square foot floor area. Industry sources said the definition could also hit some commercial data centers among Chinese tech giants.

Companies around the world have begun to struggle with the latest US action, with shares of semiconductor manufacturing equipment makers falling. US suppliers must now apply for hard-to-obtain licenses from the US government before shipping even the most rudimentary items to China.

Earlier on Friday, the United States added major Chinese memory chip maker YMTC and 30 other Chinese entities to a list of companies that US officials cannot inspect, heightening tensions with Beijing and sparking a 60 day clock this could result in much harsher penalties.

Under a new policy announced alongside the sweeping measure, if a government blocks U.S. officials from performing site checks at companies on the unverified list, U.S. officials will begin the process to add them to the list. list of entities after 60 days.

South Korea’s Ministry of Industry said in a statement on Saturday that there would be no significant disruption in equipment supply for Samsung and SK Hynix’s existing chip production in China, although it necessary to minimize uncertainty by consulting with US export control authorities.

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