US Unleashes Third Major Crackdown on China’s Semiconductor Industry
The Biden administration is set to launch its third significant crackdown on China’s semiconductor industry, imposing stringent export restrictions on over 140 Chinese companies. This move, announced on Monday, represents a major escalation in the ongoing technological competition between the US and China, targeting crucial chipmaking equipment, advanced memory chips, and investment firms supporting China’s semiconductor ambitions. The sweeping restrictions aim to stifle China’s progress in advanced chip production, particularly those with potential military applications, and are expected to have significant repercussions across the global semiconductor landscape.
Key Takeaways: A Technological Cold War Heats Up
- Massive Restrictions: The US will restrict exports to over 140 Chinese entities, including chip equipment makers like Naura Technology Group and Piotech, impacting their access to vital technologies.
- Targeting Advanced Chips: Restrictions include advanced memory chips like high bandwidth memory (HBM) crucial for AI development, further hindering China’s progress in this critical area.
- Expanded Reach: The crackdown expands its reach beyond US-made components, leveraging the Foreign Direct Product Rule to control the export of chipmaking equipment even if manufactured outside the US, but using US technology. This impacts equipment from nations like Singapore and Malaysia.
- Investment Firms Targeted: For the first time, the US is targeting Chinese investment firms involved in the semiconductor sector, including Wise Road Capital and Wingtech Technology Co, aiming to cut off funding sources.
- Global Implications: The move will likely impact major semiconductor players like Lam Research, KLA, Applied Materials, and ASM International, as well as non-US allies involved in the global chip supply chain.
A Deep Dive into the New Restrictions
This third round of sanctions marks a significant escalation in the US’s efforts to curb China’s advancement in semiconductor technology. The restrictions are multifaceted, targeting various aspects of China’s chip production capabilities.
Curbing Access to Essential Chipmaking Equipment
The new rules target 24 additional chipmaking tools and three software tools essential for the fabrication of advanced chips. The impact will extend beyond US companies, affecting non-US manufacturers as well. The inclusion of companies like Naura Technology Group and Piotech highlights the US’s intention to disrupt the entire Chinese chip supply chain. This move will directly impact the ability of Chinese firms to produce high-end semiconductors used in AI, supercomputers, and military applications.
Restricting Advanced Memory Chips: High Bandwidth Memory (HBM)
The restrictions are specifically aimed at high-bandwidth memory (HBM) chips, crucial for high-end AI applications, particularly large language models (LLMs) and high-performance computing. This action will limit China’s ability to develop cutting-edge AI systems, potentially hindering both its commercial and military technological advancements. The restrictions focus on HBM2 and higher standards, directly impacting companies like Samsung and SK Hynix.
Expanding the Foreign Direct Product Rule (FDPR): A Global Impact
Perhaps the most impactful change is the expansion of the Foreign Direct Product Rule (FDPR). This rule allows the US to regulate exports of chipmaking equipment, even if manufactured outside the US, as long as it uses any US-origin technology or software. This broadens the scope of US influence, controlling the supply chain beyond its own borders. This means that even equipment made in countries like Singapore and Malaysia using US technology will be subject to these new export restrictions, impacting 16 key Chinese companies crucial to China’s advanced chipmaking ambitions.
The FDPR is also lowering the threshold of US content required to trigger restrictions to zero. This means any item containing even the smallest amount of US-origin technology, shipped to China, becomes subject to US export controls.
Targeting Investment and Funding Sources
The addition of two investment firms, Wise Road Capital and Wingtech Technology Co, to the Entity List marks a significant development. This signals the US’s intent to tackle the financial backing of China’s semiconductor industry. It demonstrates the administration’s understanding that restricting access to physical components isn’t enough; stopping the flow of capital is equally crucial to curbing China’s technological advancements.
The Entity List: A Tool of Economic Warfare
The newly sanctioned companies will be added to the Entity List, a powerful tool used by the US to restrict the export of sensitive technologies. Companies on the list require special licenses to conduct business with US suppliers – licenses that are very rarely granted. This effectively cuts off these Chinese companies from accessing vital US components, technologies, and expertise.
Impact on Key Players and Implications
The broad scope of these restrictions will have a significant impact on multiple companies, both in the US and internationally. US semiconductor companies like Lam Research, KLA, and Applied Materials will undoubtedly experience reduced revenue from the loss of Chinese exports. Similarly, non-US companies that rely on US technology or components in their chipmaking equipment will also feel the impact, potentially impacting global supply chains.
Samsung Electronics, in particular, is expected to be significantly impacted by the new restrictions on HBM memory chips, highlighting the far-reaching effects of the action. While the US aims to address Chinese advancement, these measures are likely to cause ripples across the global semiconductor industry.
Reactions and Future Outlook
China has consistently expressed its opposition to these restrictions, characterizing them as unfair and restrictive. The long-term effect of these actions remains to be seen. While aimed at slowing China’s semiconductor development, they also create challenges for US companies reliant on the Chinese market. It could also foster additional innovation within China, pushing the country to find alternative solutions. The upcoming transition to the Trump administration adds another layer of uncertainty, however, earlier statements indicate continuity of this approach, promising more difficulties for China.
These new sanctions showcase the increasing complexity of the US-China technological rivalry. It underscores the determination of both nations to secure their technological leadership, even if it means accepting some sacrifices along the road.
**”This is not just about chips; it’s about economic security and national security,”** a senior administration official stated, emphasizing the broader strategic implications of these actions. **”We’re committed to maintaining a technological edge while working with allies to ensure a fair and resilient global semiconductor marketplace.”**
The current actions continue a trend of escalating measures that started years ago and foreshadow that we should expect more conflicts and repercussions in the years to come in the ongoing technological battle between the United States and China.
