How Biden blocked China’s access to chip technology

The Biden administration on Friday unveiled a sweeping set of export controls, including a measure to cut China off from certain semiconductor chips made with U.S. equipment anywhere in the world, firmly expanding its influence to slow Beijing’s technological and military advancements.

The rules, some of which take effect immediately, build on letters sent this year to top tool makers KLA Corp, Lam Research Corp and Applied Materials Inc, effectively requiring them to stop shipping equipment to wholly Chinese-owned factories that make advanced logic chips.

These measures may be the largest policy shift in U.S. technology shipments to China since the 1990s. If effective, they could hamper China’s chip manufacturing by forcing U.S. and foreign companies using U.S. technology to cut support for some of China’s leading factories and chip designers.

“This is going to set China back many years. The climax of the Cold War,” said Jim Lewis, a technology and cybersecurity expert at the Washington, D.C.-based think tank, the Center for Strategic and International Studies (CSIS).

“China won’t give up chip manufacturing…but it’s really going to slow them down.”

Senior administration officials previewed the rules at a briefing on Thursday, saying many of the measures were aimed at preventing foreign companies from selling advanced chips to China or providing Chinese companies with the tools to make their own advanced chips. They acknowledged, however, that they had received no commitment that the allies would implement similar measures, and discussions with those countries were ongoing.

“We recognize that the unilateral controls we impose will lose their effectiveness over time if other countries don’t join us,” an official said. “If foreign competitors are not similarly controlled, we risk compromising U.S. technological leadership.”

The U.S. expansion of control over Chinese exports of U.S. tool chips is based on expanding the so-called foreign direct product rule. It had previously expanded to give the U.S. government control over the export of overseas-made chips to Chinese telecom giant Huawei Technologies Co Ltd, and later blocked the flow of semiconductors to Russia after Russia invaded Ukraine.

On Friday, the Biden administration imposed expanded restrictions on China’s iFlytek, Dahua Technology and Megvii Technology, which were added to the Entity List in 2019 for allegedly assisting Beijing’s crackdown on the Uighur minority.

The rules announced Friday also blocked shipments of various chips used in China’s supercomputing systems. The rule defines a supercomputer as any system with more than 100 petaflops of computing power in a 6,400-square-foot footprint, a definition that could also affect some of the Chinese tech giant’s commercial data centers, two industry sources said.

Eric Sayers, a defense policy expert at the American Enterprise Institute, said the move reflects a new push by the Biden administration to curb China’s progress rather than simply seeking to level the playing field.

“The scope and potential impact of the rules are quite staggering, but of course the devil will be in the details of implementation,” he added.

Shares of semiconductor manufacturing equipment makers fell as companies around the world began to grapple with the latest U.S. action.

The Semiconductor Industry Association, which represents chipmakers, said it was studying the regulations and urged the U.S. to “implement them in a targeted manner — and work with international partners — to help level the playing field.”

Earlier on Friday, the U.S. added China’s largest memory chip maker, Yangtze Memory Technologies, and 30 other Chinese entities to a list of companies U.S. officials cannot inspect, escalating tensions with Beijing and starting a campaign that could trigger tougher penalties. 60 days.

Companies are added to an unverified list when U.S. authorities cannot 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 shipping to them.

Under a new policy announced Friday, U.S. authorities will start adding them to the Entity List after 60 days if the administration blocks U.S. officials from conducting on-site inspections of companies on the unverified list.

A physical listing of YMTC would heighten already escalating tensions with Beijing and force its U.S. suppliers to seek hard-to-obtain licenses from the U.S. government before shipping their even minimal-tech products.

The new regulations will also severely restrict the export of U.S. equipment to Chinese memory chip makers and formally send letters to Nvidia Corp and AMD Inc. restricting shipments to China of chips, nuclear weapons and other military technology used in supercomputing systems developed by countries around the world.

Reuters was the first to report key details of new restrictions on memory chip makers, including a moratorium on foreign companies operating in China and moves to expand restrictions on exports of KLA, Lam, Applied Materials, Nvidia and AMD technologies to China.

Existing chip production by Samsung and SK Hynix in China will not cause significant disruption to equipment supply, South Korea’s Ministry of Industry said in a statement on Saturday.

However, it added that it was necessary to minimise uncertainty by consulting with US export control authorities.

On Saturday, Chinese Foreign Ministry spokesman Mao Ning called the move an abuse of trade measures aimed at strengthening U.S. “technological hegemony.”

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