US tries to corner China chip industry with new export rules

Oct 7 (Reuters) – The Biden administration on Friday unveiled a sweeping set of export restrictions, including a move to cut off China from some semiconductor chips made anywhere in the world with U.S. equipment, in an effort to slow Beijing’s technology expansion. and military developments.

The rules, some of which take effect immediately, are outlined in letters sent this year to top instrument maker KLA Corp. (KLAC.O)Lam Research Corp (LRCX.O) and Applied Materials Inc (AMAT.O)They must stop exporting equipment to factories wholly owned by Chinese companies that manufacture advanced logic chips.

The series of moves may be the biggest shift in U.S. policy toward China’s naval technology since the 1990s. If effective, they could target China’s chip manufacturing industry by forcing US and foreign companies that use US technology to cut support for some of China’s leading factories and chip designers.

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“It will set the Chinese back,” said Jim Lewis, a technology and cybersecurity expert at the Center for Strategic and International Studies (CSIS), a Washington DC-based think tank. The height of the Cold War.

“China is not going to give up chipmaking… but this will actually slow them down.”

At a briefing Thursday with reporters previewing the rules, senior government officials said many of the measures are aimed at preventing foreign companies from selling advanced chips to China or giving Chinese companies the tools to make their own advanced chips. However, they admitted that they had received no promise that the Allies would implement similar measures and that discussions with those countries were ongoing.

“Unless other countries join us, we recognize that unilateral restrictions will lose effectiveness over time,” an official said. “Unless foreign competitors are subject to similar restrictions, we risk harming American technology leadership.”

The expansion of U.S. powers to restrict exports to China of chips made with U.S. equipment is based on expanding the so-called Foreign Direct Manufacturing Rule. It was expanded before the U.S. government authorized Chinese telecom giant Huawei Technologies Co Ltd ( HWT.UL ) to restrict exports of chips made abroad and later to halt the flow of semiconductors to Russia after its invasion of Ukraine.

On Friday, the Biden administration applied expanded restrictions to China’s IFLYTEK, Dahua Technology and Megvii Technology, companies added to the company list in 2019 over allegations they helped Beijing suppress its Uyghur minority group.

The rules, published on Friday, prevent the export 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 computing power in an area of ​​6,400 square feet, which could also hit some of the commercial data centers of Chinese tech companies, two industry sources said.

Eric Sayers, a defense policy expert at the American Enterprise Institute, said the move represents a new initiative by the Biden administration.

“The scope and potential implications of the rule are quite awe-inspiring, but the devil will surely be in the details of implementation,” he added.

As companies around the world began to wrestle with the latest U.S. action, shares of semiconductor manufacturing equipment makers fell.

The Semiconductor Industry Association, which represents chipmakers, said it was studying the regulations and urged the U.S. to “target the rules — and work with international partners — to help level the playing field.”

Earlier on Friday, the US added China’s top memory chipmaker YMTC and 30 other Chinese companies to a list of companies that US officials cannot inspect, stoking tensions with Beijing and starting a 60-day clock. read more

When U.S. officials can’t complete on-site visits and can’t determine whether they can trust U.S. suppliers to receive U.S. technology when sending them to U.S. suppliers, they are put on the nonverified list.

Under the new policy announced on Friday, if the government prevents US officials from conducting site inspections of companies on the non-verified list, US officials will begin the process of adding them to the list after 60 days.

The YMTC company listing would escalate already escalating tensions with Beijing and force its US suppliers to obtain hard-to-obtain licenses from the US government before shipping even the most low-tech goods.

The new regulations would severely limit exports of US equipment to Chinese memory chip makers and formalize letters sent to Nvidia Corp. (NVDA.O) and Advanced Micro Devices Inc (AMD) (AMD.O) China restricts exports of chips used in supercomputing systems that countries around the world rely on to develop nuclear weapons and other military technology.

Reuters first reported key details of the new bans on memory chip makers, which include an exemption for foreign companies operating in China and moves to expand restrictions on exports to China from KLA, Lam, Applied Materials, Nvidia and AMD.

South Korea’s Industry Ministry said in a statement on Saturday that there would be no significant disruption in equipment supplies to Samsung (005930.KS) and SK Hynix (000660.KS) Existing chip manufacturing in China.

However, it added that it was necessary to consult with US export control authorities to reduce uncertainty.

On Saturday, China’s Foreign Ministry spokesman Mao Ning called the move an abuse of trade measures designed to bolster America’s “technological supremacy.” read more

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Reporting by Stephen Nellis in San Francisco and Karen Freifeld in New York Additional reporting by David Shepherdson in Washington, Joyce Lee in Seoul and Yu Lun Tian in Beijing Editing by Ana Nicolasi da Costa and Clarence Fernandez

Our Standards: Thomson Reuters Trust Principles.

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