Biden administration announced a comprehensive set of export control measures on Friday, which includes measures to block China out of certain chips for semiconductors made anywhere in the world using U.S. tools, dramatically expanding its scope in its attempt to limit the technological and military advancements of Beijing.
The regulations, some of which are in effect immediately and build on restrictions made in letters to the top tool makers KLA Corp. Lam Research Corp (NASDAQ: LRCX) and Applied Materials Inc (NASDAQ: AMAT) effectively forcing the companies to stop shipments of equipment made by Chinese owned factories that make sophisticated logic chips.
Related: Taiwan says it will protect the interests of its companies in the U.S.-led Chip 4 Group.
The range of initiatives could be the biggest change on U.S. policy toward shipping technology to China since the 1990s. If they’re successful, they’ll slow China’s chip manufacturing sector through a process that would force American as well as foreign firms that employ U.S. technology to cut off assistance to some of China’s top manufacturers and chip designers.
“This could cause the Chinese back a few years,” said Jim Lewis an expert in cybersecurity and technology expert from the Center for Strategic and International Studies (CSIS) CSIS, which is a D.C.-based think tank. D.C.-based think tank. He claimed that the new policies go back to the strict regulations during the height of Cold War.
“China will not stop chip manufacturing … however this is going to reduce them (down).”
In a press conference on Thursday to discuss the new regulations, top government officials explained that many of the measures were designed to prevent foreign companies in selling chips with advanced technology to China or providing Chinese companies with the tools needed to create their own chips. However, they acknowledged that they haven’t secured any assurances that allies could implement similar measures. They also said that talks with those countries continue.
“We acknowledge that unilateral restrictions we’ve put in place will be less effective in time if other nations do not follow us in joining,” one official said. “And we run the risk of affecting U.S. technology leadership if foreign competitors aren’t controlled in the same way as we are.”
Expanding U.S. powers to control exports to China of chips produced using U.S. tools is based on a broadening of rule known as the foreign direct product rule. The rule was originally extended to grant an U.S. government authority to regulate the exports of chips manufactured abroad for export to Chinese communications huge Huawei Technologies Co Ltd and later , to block the flow of semiconductors into Russia following its military invasion in Ukraine.
On Friday on Friday, the Biden administration imposed the expanded restrictions on the Chinese companies IFLYTEK, Dahua Technology, and Megvii Technology, companies added to the list of entities in the year 2019 amid allegations that they assisted Beijing with the persecution of China’s Uyghur minority group.
The regulations, which were announced on Friday also prohibit the shipments of a variety of chips to be used within Chinese supercomputing devices. The regulations define a supercomputer as any device that can provide greater than one petaflop in computing power in a floor area of 6,400 square feet. according to two industry sources have said could also impact commercial data centers located at Chinese technological giants.
Eric Sayers, a defense policy analyst from the American Enterprise Institute, said this move is a fresh strategy from officials of the Biden administration to thwart China’s progress instead of looking to level play.
“The nature of the rule and the potential consequences are quite astonishing, but the devil will be in the finer details of the implementation,” he added.
Global companies were grappling with the most recent U.S. action, with the share of semiconductor equipment manufacturers declining.
The Semiconductor Industry Association, which is the body that represents chip makers, said it is studying rules and asked for the United States to “implement the rules in a specific manner as well as in collaboration with international partners to ensure that the rules are applied equally across the field.”
Related: Meta releases AI software tools that will make it easier to switch between Nvidia and AMD chips.
On Friday on Friday, it was announced that the United States added China’s top memory chip maker YMTC along with 30 other Chinese companies to a list of companies U.S. officials cannot inspect and is escalating tensions Beijing and setting the 60-day clock that could result in much more severe sanctions.
Companies are placed on the list of untrusted companies in cases where U.S. authorities cannot complete inspections on the premises to determine whether they are able to use the latest U.S. technology, forcing U.S. suppliers to take extra caution in shipping their goods to these countries.
In a new policy that was that was announced this Friday evening, in the event that any government prohibits U.S. officials from conducting inspections of companies that are on the unofficial list, U.S. authorities will begin the process of including them on the list of entities within 60 days.
Listing of entities YMTC could increase tensions already rising with Beijing and force U.S. suppliers to seek permissions that are difficult to obtain by authorities of the U.S. government before shipping these low-tech products.
The new regulations will restrict the export to China of U.S. equipment to Chinese memory chip manufacturers and also officialize letters for Nvidia (NASDAQ: NVDA) Corp and Advanced Micro Devices Inc (NASDAQ: AMD) restricting exports into China of chips that are used in supercomputing systems that countries all over the world depend on to create nuclear weapons as well as other military technologies.
Reuters was the first to announce important details about the new restrictions placed on chipmakers and a reprieve for foreign companies that operate in China and moves to expand the limitations on the shipment to China of technology that come from KLA, Lam, Applied Materials, Nvidia and AMD.
The South Korean industry ministry stated in a statement released on Saturday that there will be no major disruption to the supply of equipment in the case of Samsung (KS: 005930) and SK Hynix’s current chip manufacturing in China.
However, it was essential to minimize uncertainty by consulting to U.S. authority for export controls, it said.
On Saturday the foreign ministry’s spokesperson Mao Ning called the move an infringement of trade rules intended to strengthen China’s position in the United States’ “technological hegemony”.
