The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) on Monday announced updated export controls aimed at restricting China’s access to advanced semiconductor technologies.
This move targets China’s ability to produce cutting-edge chips, essential for advanced weaponry, artificial intelligence (AI), and military modernization. These measures build on previous efforts to curb China’s technological advancements and reduce national security risks.
Key Measures in the New Rules
The updated regulations introduce controls on:
- Semiconductor Manufacturing Equipment: 24 types of equipment, including etching, deposition, lithography, and inspection tools, are now subject to export restrictions.
- Advanced Software Tools: Software used for developing or producing advanced-node semiconductors is now restricted.
- High-Bandwidth Memory (HBM): Critical for AI and advanced computing, HBM exports to China now require U.S. government authorization.
- Entity List Updates: 140 new additions and 14 modifications target Chinese semiconductor fabs, tool manufacturers, and investment firms supporting China’s military goals.
- Software and Technology Controls: Enhanced restrictions on Electronic and Technology Computer Aided Design (ECAD and TCAD) tools and software keys.
New Foreign Direct Product (FDP) Rules:
- SME FDP Rule: Extends jurisdiction over foreign-produced semiconductor equipment destined for Macau or countries in Group D:5, including China.
- Footnote 5 FDP Rule: Covers foreign-produced items involving entities on the Entity List that support China’s military modernization.
- De Minimis Rule: Applies to items containing any amount of U.S.-origin technology.
The BIS acknowledged that these restrictions aim to “impair China’s ability to indigenize production” of critical technologies. Commerce Secretary Gina Raimondo described the rules as “groundbreaking and sweeping.” The measures also address potential loopholes, including the stockpiling of restricted equipment during delays in the rule’s release.
Geopolitical and Industry Impact
These rules are designed to curb China’s ability to build a self-sufficient semiconductor industry, a key goal for Beijing. Chinese entities had previously found loopholes in earlier restrictions, stockpiling chips and tools before the regulations were finalized. The new controls, however, aim to close these gaps.
While the restrictions may slow China’s semiconductor ambitions, experts note potential loopholes, such as the availability of older HBM chips. Gregory Allen from the Wadhwani AI Center highlighted that not all facilities linked to HUAWEI were blacklisted, leaving room for maneuvering.
Industry Lobbying and Financial Impact
Chip toolmakers, including Applied Materials, ASML, Lam Research, and KLA, have ramped up lobbying efforts to shape the scope of these restrictions.
Applied Materials reported an 86% rise in revenue from Chinese exports, amounting to $7.9 billion in the first nine months of the year, which accounts for 40% of its total revenue, according to The Wall Street Journal.
U.S. Allies and Global Cooperation
Countries like South Korea, Japan, and the Netherlands have supported U.S. efforts by imposing their own restrictions. This collaboration underscores a unified stance against China’s access to advanced chip technology. However, China’s Foreign Ministry criticized the U.S. for “abusing export control measures” and undermining free-market principles.
Strategic Goals and Broader Implications
BIS’s actions align with a broader strategy to maintain a technological edge over China while safeguarding national security. The focus remains on slowing China’s progress in AI and military tech development. The U.S. also seeks to prevent the use of AI for military operations and human rights violations, such as surveillance of minorities and political dissidents.
These export controls, marking the fourth attempt in three years by the Biden administration, highlight the U.S. ‘small yard, high fence’ approach—limiting access to critical technologies while maintaining a tight grip on key innovations
The U.S. strategy underscores a dual objective: slowing China’s AI development and disrupting its semiconductor ecosystem. The BIS emphasized that these actions aim to protect national security while addressing technological advancements with potential military uses.
Speaking about the new measures, U.S. Secretary of Commerce Gina Raimondo said,
This action represents the culmination of the Biden-Harris Administration’s targeted approach, working closely with our allies and partners, to undermine the PRC’s ability to indigenize the production of advanced technologies that pose a risk to our national security. Further strengthening our export controls highlights the pivotal role of the Department of Commerce in implementing the United States’ broader national security strategy. No administration has been tougher in strategically addressing China’s military modernization through export controls than the Biden-Harris Administration.