US aims to disrupt China’s chip industry with new rules | Trade war news

On Friday, the Biden administration unveiled a sweeping set of export controls, including a measure to cut off China from some semiconductor chips made with U.S. tools anywhere in the world, significantly broadening their reach to slow Beijing’s technological and military advances.

The series of measures could be the biggest change in US technology transfer policy to China since the 1990s. If effective, they could set back China’s chipmaking industry for years by forcing American and foreign companies that use US technology to cut support for some of China’s leading factories and chip designers.

“It’s going to set the Chinese back years,” said Jim Lewis, a technology and cybersecurity expert at the Washington-based Center for Strategic and International Studies (CSIS), who said the policies are aligned with stricter rules. The height of the Cold War.

“China isn’t going to give up chipmaking… but it’s going to really slow them down [down].”

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

In a briefing with reporters on Thursday, senior government officials said many of the measures seek to prevent foreign firms from selling advanced chips to China or giving Chinese firms the tools to make their own advanced chips as they review the rules. However, they admitted that they had not yet made any promises that allied nations would take similar measures, and that discussions with these nations were ongoing.

“We recognize that the unilateral controls we have in place will become ineffective over time unless other countries join us,” one official said. “And unless foreign competitors are subject to similar controls, we risk undermining U.S. technological leadership.”

The potential impact is “pretty amazing”

The expansion of US powers to control the export of US-tooled chips to China is directly based on an expansion of the so-called foreign product rule. Previously, it was extended to give the US government the power to control exports of overseas-made chips to Chinese telecom giant Huawei Technologies Co Ltd and later to stop the flow of semiconductors to Russia after it invaded Ukraine.

On Friday, the Biden administration imposed expanded restrictions on Chinese companies IFLYTEK, Dahua Technology and Megvii Technology, which were added to the list in 2019 for allegedly helping Beijing suppress the Uyghur minority group.

The regulations could hit the data centers of some Chinese tech giants [File: Florence Lo/Illustration/Reuters]

The rules issued Friday also prevent the shipment of a wide range of chips for use in Chinese supercomputer 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 (595 square meters), which two industry sources said could beat some of the commercial data centers of Chinese tech giants.

US Senate Democratic leader Chuck Schumer welcomed the announcement, arguing that the rules would “protect our nation’s innovation from China’s predatory actions.”

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

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

The Semiconductor Industry Association, which represents chipmakers, said it was studying the rules and urged the United States to “implement the rules purposefully and in cooperation with international partners to help level the playing field.”

To intensify tensions

On Friday morning, the United States added China’s top memory chip maker YMTC and 30 other Chinese entities to a list of companies that U.S. officials cannot inspect, raising tensions with Beijing and targeting a firm that has long troubled the Biden administration.

The “unapproved list” is a potential precursor to tougher economic blacklists, but companies that comply with US vetting rules can get off the list. U.S. officials on Friday seized nine such firms, including China’s Wuxi Biologics unit, which makes ingredients for AstraZeneca Plc’s COVID-19 vaccine.

The new rules will also severely limit exports of US hardware to Chinese memory chip makers and formalize letters sent to Nvidia Corp and Advanced Micro Devices Inc (AMD) to restrict shipments to China of chips used in supercomputing systems trusted by countries around the world. to develop nuclear weapons and other military technologies.

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

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