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Chinese chip industry aims for sweeping new US semiconductor export rules: all the details

The Biden administration on Friday released a wide array of export controls, including a measure aimed at cutting China off from certain semiconductor chips manufactured anywhere in the world on US equipment, greatly expanding its options in a bid to slow Beijing’s technological and military progress. .

The rules, some of which are effective immediately, are based on restrictions sent in letters earlier this year to leading instrument makers KLA, Lam Research and Applied Materials, effectively requiring them to stop supplying equipment to wholly-owned Chinese factories making advanced logic chips. .

The set of measures could lead to the biggest shift in US technology delivery policy to China since the 1990s. If successful, they could put a brake on China’s chip industry, forcing US and foreign companies that use US technology to stop supporting some of China’s leading chip factories and developers.

“It will set the Chinese back years,” said Jim Lewis, a technology and cybersecurity expert at the Center for Strategic and International Studies (CSIS), a think tank in Washington, D.C., who said the policy dates back to the hard-line rules of the height of the Cold War.

“China is not going to stop making chips… but it will really slow them down (slow down).”

At a briefing with reporters Thursday on a preliminary review of the rules, senior government officials said many of the measures were aimed at preventing foreign firms from selling advanced chips to China or from supplying Chinese firms with the tools to produce their own advanced chips. However, they acknowledged that they had not received any promises that the allied countries would take similar measures, and that negotiations with these countries were ongoing.

“We understand that the unilateral controls that we are introducing will lose effectiveness over time unless other countries join us,” one official said. “And we risk damaging US technology leadership if foreign competitors are not subjected to similar scrutiny.”

The expansion of US powers to control the export of chips made with American tools to China is based on an expansion of the so-called foreign direct product rule. It was previously expanded to give the US government the power to control the export of foreign-made chips to Chinese telecommunications giant Huawei and then stop the flow of semiconductors to Russia after it invaded Ukraine.

On Friday, the Biden administration applied extended restrictions on Chinese companies IFLYTEK, Dahua Technology and Megvii Technology, added to the list of entities in 2019 over allegations that they helped Beijing crack down on the Uyghur minority.

The rules, released on Friday, also ban the supply of a wide range of chips for use in Chinese supercomputing systems. The rules define a supercomputer as any system with more than 100 petaflops of processing power in 6,400 square feet, a definition that two industry sources say could also affect some commercial data centers at Chinese tech giants.

Eric Sayers, a defense policy expert at the American Enterprise Institute, said the move reflects a new attempt by the Biden administration to contain China’s advance, rather than just trying to level the playing field.

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

Companies around the world have begun to grapple with the latest U.S. move as shares in semiconductor manufacturing equipment makers tumble.

The Semiconductor Industry Association, which represents chip makers, said it was studying the rules and urged the United States to “apply the rules in a targeted manner — and in collaboration with international partners — to help level the playing field.”

Earlier Friday, the United States added YMTC, China’s largest memory chip maker, and 30 other Chinese companies to a list of companies that US officials cannot inspect, escalating tensions with Beijing and introducing a 60-day deadline that could entail much more tough sanctions.

Companies are added to the unverified list when US authorities fail to make site visits to determine if they can be trusted to receive confidential US technology, forcing US suppliers to be more careful when delivering to them.

Under a new policy announced Friday, if the government does not allow US officials to conduct audits of companies on the unverified list, US authorities will begin the process of adding them to the list of entities after 60 days.

Listing YMTC as a company would escalate already growing tensions with Beijing and force U.S. suppliers to seek hard-to-find licenses from the U.S. government before shipping even the most low-tech goods to them.

The new rules will also severely restrict exports of U.S. hardware to Chinese memory chip makers and formalize letters sent to Nvidia and AMD restricting China’s supply of chips used in supercomputing systems that countries around the world rely on to develop nuclear weapons and other military technology. .

Reuters was the first to reveal key details of new restrictions on memory chip makers, including a delay for foreign companies operating in China and measures to expand restrictions on technology shipments to China from KLA, Lam, Applied Materials, Nvidia and AMD. .

South Korea’s Ministry of Industry said in a statement Saturday that there would be no major disruption to equipment supplies for Samsung and SK Hynix’s existing chip manufacturing in China, although uncertainty was needed to be minimized through consultation with US export control authorities.

© Thomson Reuters 2022

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