U.S. Imposes Sweeping Semiconductor Export Ban to China
- October 10, 2022
- Posted by: Quatro Strategies
- Category: Legislation
The United States issued sweeping new export controls, including a ban on certain chip exports to China made anywhere in the world with U.S. equipment. The Biden Administration tries to expand its effort to hamper Beijing’s technological and military advancements. More than 30 Chinese companies, including top memory chipmaker YMTC, were added to a list that U.S. officials have been unable to inspect. The new measures will increase tensions with China and start a 60 day-clock that could trigger much tougher penalties.
The listings were the first of a series of new restrictions announced on Friday on exports of technology to China aimed at blocking military advances. The measures included curbs on access to chipmaking tools for Chinese firms including YMTC. There had been bipartisan support for YMTC to be placed in the blacklist. The company, founded in 2016, poses a “direct threat” to U.S. chip companies, according to the Biden administration.
YMTC is under investigation from the U.S. Commerce Department over whether it violated U.S. export controls by selling chips to blacklisted companies, including Huawei. Its chips also are being evaluated by Apple for inclusion in some of its iPhones in China, a major concern for U.S. lawmakers and the Biden administration.
Companies are added to the unverified list because U.S. authorities cannot make on site visits to determine whether they can be trusted with sensitive technology exports from the U.S. Inspections of Chinese companies require the approval of China’s commerce ministry.
U.S. exporters must conduct additional due diligence before sending goods to entities placed on the “unverified list,” like the 31 added on Friday, and may have to apply for more licenses.
Under a new Biden administration policy, if a government prevents on site visits, the company in question is place in the unverified list, starting the 60-day process for adding them to the entity list.
Entity listing YMTC would further escalate tensions with Beijing and force its U.S. suppliers to seek difficult-to-obtain licenses from the U.S. government before shipping them even the most low-tech items.
Friday’s measures were not all bad for China. The United States removed a unit of Wuxi Biologics, maker of ingredients for AstraZeneca’s COVID-19 vaccine, from the unverified list. U.S. officials had been able to conduct an inspection at the Wuxi city site, paving the way for removal from the list.
Some of Friday’s rules will take effect immediately, building on restrictions sent in letters to major chip toolmakers KLA, Lam Research and Applied Materials. The rules require companies to halt equipment shipments to wholly Chinese-owned factories producing advanced logic chips.
If effective, the new rules could hit China’s chip manufacturing industry hard by forcing American and foreign companies that use U.S. technology to cut off support for some of China’s leading factories and chip designers.
While many of the measures were imposed to prevent foreign firms from selling advanced chips to China or supplying Chinese firms with tools to make their own advanced chips, it is unknown if allied nations would implement similar measures.
The expansion of U.S. powers to control exports to China of chips made with U.S. tools is based on a broadening of the so-called foreign direct product rule. It was previously expanded to give the U.S. government authority to control exports of chips made overseas to Chinese telecoms giant Huawei and later to stop the flow of semiconductors to Russia after its 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 they aided Beijing in the suppression of its Uyghur minority.
The rules published on Friday also block shipments of a broad array of chips for use in Chinese supercomputing systems.
Companies around the world began to deal with the latest U.S. 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 way and in collaboration with international partners to help level the playing field.”
Subscribe to Top Insights Today
The Executive Newsletter -Top Insights Today- puts global business events in perspective through special insights
Join the ranks of global executives and subscribe to Top Insights Today
Top Insights Today covers insights on energy, clean-tech, oil&gas, mining, rare earths, defense, aviation, infrastructure, manufacturing, electrical vehicles, big-tech, finance and politics of business