Some of the sources said it was likely that the rules would include more actions against China.
Washington
The Biden administration plans to tighten restrictions on US shipments of semiconductors and chip-making tools to China next month, according to several people familiar with the situation.
People who spoke on the condition of anonymity said that the Commerce Department plans to publish new rules based on restrictions that were sent in letters earlier this year to three U.S. companies: KLA Corp (KLAC.O), Lam Research Corp (LRCX.O), and Applied Materials Inc (AMAT.O). These companies are KLA Corp (KLAC.O), Lam Research Corp (LRCX.O), and Applied Materials Inc (AMAT.O). No one knew about the plan for new rules before.
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The letters, which were acknowledged by the companies in public, told them they couldn’t sell chipmaking equipment to Chinese factories that make advanced semiconductors using sub-14 nanometer processes unless they got licences from the Commerce Department.
The rules would also make official the restrictions in letters sent by the Commerce Department to Nvidia Corp. (NVDA.O) and Advanced Micro Devices (AMD.O) last month. The letters told Nvidia and AMD to stop sending certain artificial intelligence computing chips to China unless they got licences.
Some of the sources said it was likely that the rules would include more actions against China. The rules could also come out later than expected or the restrictions could be changed.
So-called “Is Informed” letters let the Commerce Department put controls in place quickly without going through long rule-writing processes. However, the letters only affect the companies that get them.
If the letters were turned into rules, they would have a wider reach and could affect other U.S. companies that make similar technology. Companies that want to challenge Nvidia and AMD’s dominance in artificial intelligence chips could be affected by the rules.
Intel Corp. (INTC.O) and new companies like Cerebras Systems are both going after the same advanced computing markets. Intel said it is keeping a close eye on the situation, but Cerebras didn’t want to say anything.
One source said that the rules could also make it hard to send products with the targeted chips to China without a licence. The A100 chip from Nvidia is in data centre servers made by Dell Technologies (DELL.N), Hewlett Packard Enterprise (HPE.N), and Super Micro Computer (SMCI.O).
Dell and HPE said they were keeping an eye on the situation, but Super Micro Computer did not answer when asked for a comment.
A senior Commerce official wouldn’t say anything about what was going to happen, but they did say, “As a general rule, we try to make any restrictions in well-informed letters official with a regulatory change.”
On Friday, a spokesperson for the Commerce Department wouldn’t comment on specific rules, but they did say that they are “taking a comprehensive approach to implement additional actions to protect U.S. national security and foreign policy interests.” This includes keeping China from getting U.S. technology that could be used to modernise the military.
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KLA, Applied Materials, and Nvidia all said they didn’t want to say anything, and Lam didn’t answer when asked. AMD didn’t say anything about the specific policy change, but it did say again that it doesn’t think its new licencing requirement will have a “material impact.”
‘CHOKE POINT’
The action is planned because President Joe Biden’s administration has been trying to stop China from getting ahead by focusing on technologies where the US still has the upper hand.
Jim Lewis, a technology expert at the Center for Strategic and International Studies, said, “The plan is to choke off China, and they have found that chips are a choke point. They can’t make this stuff, and they can’t make the equipment for making it.” “That will be different.”
The U.S. Chamber of Commerce, which is a business lobbying group, told its members last week that AI chips and tools for making AI chips will soon be limited.
The chamber said, “We are now hearing that members should expect a series of rules or maybe an overarching rule before the midterm election to codify the guidance in recently sent “is-informed” letters from the Commerce Department to chip equipment and chip design companies.”
The group also said that the agency plans to add more Chinese supercomputing companies to a list of companies that can’t trade with the U.S.
In July, Reuters was the first to report that the Biden administration was talking about banning the export of tools used to make chips to Chinese factories that make advanced semiconductors with a size of 14 nanometers or less.
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Two of the sources said that U.S. officials have reached out to allies to try to get them to make similar rules so that foreign companies can’t sell technology to China that American companies can’t ship.
“Coordination with allies is key to maximising effectiveness and minimising unintended consequences,” said Clete Willems, a former trade official in the Trump administration. “This should favour broad regulations that others can copy instead of one-off “is informed” letters.”
