The US is preparing to impose sweeping export controls to slow Chinese efforts to source semiconductors and chip-making equipment for supercomputers and other military applications.
According to several people familiar with the situation, the Commerce Department is poised to announce restrictions that would essentially prevent US companies from selling cutting-edge technology to Chinese corporations and the ability of non-US companies to sell products using US technology, would severely restrict customers in China.
The controls are the latest attempt to prevent China from using American technology to develop military programs ranging from quantum computers to hypersonic weapons. The US is trying to prevent Chinese companies from supplying American technology to the People’s Liberation Army through Beijing’s “civilian-military fusion plan”.
The restrictions are being tailored to make it harder for Chinese chipmakers — including Semiconductor Manufacturing International Corporation, Yangtze Memory Technologies Co and ChangXin Memory Technologies — to close the wide technology gap with rivals in the US, Europe and elsewhere in Asia.
The Financial Times reported earlier this year that YMTC is supplying chips to telecommunications equipment maker Huawei, apparently in violation of US export controls.
“The US government wants granular control over every US technology used in semiconductor manufacturing. It wants to be able to broadly ban use by or export to certain companies in China,” said Paul Triolo, technology expert at the Albright Stonebridge Group.
The US will introduce two rules, according to a person familiar with the situation. The first is to prevent China from securing advanced chips for supercomputers and artificial intelligence applications.
China launched its first exascale supercomputer last year, overtaking the US. Most of the processors that power such supercomputers are being developed by companies like Tianjin Phytium Information Technology, but they cannot yet be manufactured in China. The US blacklisted Phytium last year after it was revealed that some of its chips were made by Taiwan Semiconductor Manufacturing Company.
Two people familiar with the plan said the US would set a 14-nanometer threshold that would prevent companies from exporting cutting-edge technology to China. The first rule will also restrict the export of semiconductor manufacturing equipment.
The government will use the Foreign Direct Product Rule, a mechanism first used against Huawei. It prevents companies from selling products that use US technology without obtaining an export license – which is usually difficult to obtain – from the trade department.
Washington will also introduce a second rule advising foreign countries that companies will be placed on an export blacklist — known as an “entity list” — if they fail to cooperate with efforts to ensure the groups adhere to “safe trade.” ‘ and not complicit in violating other export controls.
Eric Sayers, managing partner at security consultancy Beacon Global Strategies, said the overall package was a “bold” move. “It will buy them [Joe] Biden aligns with China hawks on Capitol Hill who are frustrated by the slow development of export control policies,” he said.
A semiconductor industry executive said there were still questions about “how big the shot” the Biden administration wants to be, adding that the details outlined in the rules are critical. “There are many different ways in which the boundaries are drawn [of technology] can be defined,” he said.
In an interview with the FT, Sanjay Mehrotra, chief executive of US memory chipmaker Micron, declined to say whether the rules would affect sales in China.
“China is an important market for the entire semiconductor industry. It’s a big market and our sales there are in line with the rest of the semiconductor industry,” said Mehrotra.
The Commerce Department declined to comment.
consequences Demetri Sevastopulo on twitter
https://www.ft.com/content/9fd8b86f-4ff2-4a1f-98b9-739360cea98c The US wants to introduce far-reaching export controls to curb Chinese chip manufacturers