The United States began its third crackdown on China’s semiconductor industry in three years on Monday, limiting shipments to 140 businesses, including Naura Technology Group, a manufacturer of chip equipment, among other actions.
The package, which also targets exports of advanced memory chips and additional chipmaking tools to China, also imposes new export restrictions on Chinese chip toolmakers Piotech, ACM Research, and SiCarrier Technology in an attempt to stifle Beijing’s chipmaking aspirations.
The action is one of the final significant attempts by the Biden administration to prevent China from obtaining and manufacturing semiconductors that could contribute to the development of artificial intelligence for military use or pose a threat to American national security in any other way.
Only a few weeks remain until President-elect Donald Trump takes office, and it is anticipated that he will keep many of Biden’s tough-on-China policies.
The package includes new export restrictions on chipmaking equipment manufactured in Singapore and Malaysia, new restrictions on 24 additional chipmaking tools and three software tools, and restrictions on shipments of high-bandwidth memory chips, which are essential for high-end applications like AI training, that are headed to China.
The action, according to Commerce Secretary Gina Raimondo, is intended to stop China from developing its own domestic semiconductor manufacturing infrastructure, which it plans to utilize to fund the modernization of its military.
The plan’s main details and the number of participating companies were initially published by Reuters.
Lam Research, KLA, and Applied Materials, as well as foreign businesses like Dutch equipment manufacturer ASM International, will probably suffer from the tool controls. Nearly two dozen semiconductor companies, two investment firms, and more than 100 chipmaking tool manufacturers are among the Chinese businesses subject to the new limitations.
These businesses collaborate with Huawei Technologies of China and include Swaysure Technology Co., Si En Qingdao, and Shenzhen Pensun Technology Co. After being hampered by U.S. sanctions, the leader in telecoms equipment is now in the epicenter of China’s advanced semiconductor development and manufacturing.
In order to prevent U.S. vendors from exporting to them without first obtaining a special authorization, they will be added to the entity list.
When questioned about the U.S. restrictions, Lin Jian, a spokeswoman for the Chinese foreign ministry, claimed that such actions disrupted global supply chains and threatened the world economic trade order.
At a routine news briefing on Monday, he continued, China will take steps to protect the rights and interests of its companies.
Following the announcement of the additional limitations, China’s commerce ministry posted a statement on its official website describing the U.S. restrictions as a blatant instance of economic coercion and non-market activities.
Since the United States and other nations have limited exports of the sophisticated chips and the equipment needed to produce them, China has intensified its efforts to become self-sufficient in the semiconductor industry. However, it still lags years behind industry heavyweights like ASML in the Netherlands and Nvidia in AI processors.
Additionally, the United States is about to impose more limitations on China’s largest contract chip manufacturer, Semiconductor Manufacturing International Co., which was listed on the Entity List in 2020 but had a policy that permitted the granting of billions of dollars’ worth of licenses to send goods to it.
Three firms that invest in chips will be added to the U.S. entity list for the first time. In order to support China’s government’s efforts to acquire companies with sensitive semiconductor manufacturing capabilities essential to the defense industrial bases of the United States and its allies with the goal of relocating these entities to China, the department added Chinese private equity firm Wise Road Capital, tech firm Wingtech Technology Co., and JAC Capital.
Typically, businesses who apply for licenses to ship to companies on the Entity List are turned down.
By restricting what their businesses can export to China, a provision of the new package that deals with the foreign direct product rule may harm certain allies of the United States.
The new rule will give the United States more authority to restrict the export of chipmaking equipment to specific chip facilities in China from American, Japanese, and Dutch producers located elsewhere in the world.
The restriction applies to equipment manufactured in Israel, Malaysia, Singapore, South Korea, and Taiwan, however it does not apply to equipment made in Japan or the Netherlands.
16 businesses on the entity list that are thought to be crucial to China’s most ambitious chipmaking goals will be subject to the enhanced foreign direct product rule.
The rule will also lower to zero the amount of U.S. content that determines when certain foreign items are subject to U.S. control. That will allow the U.S. to regulate any item shipped to China from overseas if it contains any U.S. chips.
The new rules are being released after lengthy discussions with Japan and the Netherlands, which, along with the United States, dominate the production of advanced chipmaking equipment.
The Dutch government said it will study the new restrictions, adding that every country has its own considerations on national security and export controls.
ASML said on its website that it did not see a material impact on its business, adding that if the Dutch government makes a similar security assessment, it could affect exports of some of its chip making tools.
The latest rules are the third major package of chip-related export curbs on China adopted under the Biden administration.
In October 2022, the United States published asweeping set of controlson sale and manufacture of certain high-end chips that was considered to be the biggest shift in its tech policy toward China since the 1990s.
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