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Revised U.S. Measures Seek to Further Limit China’s Access to Advanced Semiconductor Technologies

by Rahil M
0 comment

The Biden administration is making adjustments to the parameters governing the export of these chips to China, following Nvidia’s development of a China-specific model to bypass last year’s restrictions.

The United States is preparing to introduce more stringent measures aimed at restricting China’s access to advanced semiconductors and chipmaking equipment in an effort to prevent the acquisition of cutting-edge technologies that could provide a military advantage to its geopolitical rival.

The latest rules are designed to enhance and close the loopholes in restrictions that were initially implemented in October of the previous year. The Biden administration is aiming to bolster controls on the sale of graphics chips for artificial intelligence applications and advanced chipmaking equipment to Chinese companies.

Additionally, the United States will implement more rigorous checks on Chinese firms attempting to evade export restrictions by routing shipments through other countries. Chinese chip design firms will also be added to a trade restriction list, which mandates that overseas manufacturers must obtain a U.S. license to fulfil orders from these firms.

These updated restrictions will be officially published in the coming week. Following this news report, chip-related stocks saw a decline in Asia. Notably, Tokyo Electron Ltd., Advantest Corp., and Disco Corp. in Japan all saw drops of at least 4% and South Korean stocks like Hana Micron Inc. also experienced declines.

The initial export controls faced criticism, particularly for not garnering support from key allies, including the Netherlands and Japan, before their implementation. These controls inadvertently allowed chip equipment companies in those countries to continue selling advanced equipment to Chinese customers, enabling China to progress in developing its domestic capabilities.

Huawei Technologies Co., a major Chinese telecommunications company, introduced a new smartphone in August powered by an advanced 7-nanometer processor. This development showcased China’s manufacturing capabilities, which surpassed the point where the U.S. initially sought to halt its progress.

The achievement by Huawei cast doubt on Washington’s ability to impede Beijing’s technological ambitions and has increased political pressure on the Biden administration to impose more sanctions on Huawei and its chipmaking partner, Semiconductor Manufacturing International Corp. The United States has initiated a formal investigation into the Huawei phone. It’s important to note that any resulting restrictions on Huawei or SMIC would be a separate process from the new export control rules.

Multiple companies have voiced objections to the Biden administration’s strategy. Peter Wennink, the CEO of Dutch chip equipment leader ASML Holding NV, publicly opposed the measures and predicted that Chinese companies would develop competing technology. U.S. firms such as Nvidia Corp., a leader in graphics chips for artificial intelligence services, have also questioned the long-term effectiveness of trade limitations.

However, the Biden administration is working to address several outstanding issues with stricter rules, particularly related to the development of AI and the transfer of technologies through other countries.

The new controls regarding graphics chips include components known as accelerators, which are utilized in data centres for training AI software. The Biden administration is making adjustments to the parameters governing the export of these chips to China, following Nvidia’s development of a China-specific model to bypass last year’s restrictions.

Furthermore, the rules will restrict the shipment of certain chips to overseas subsidiaries and affiliates of Chinese companies. Companies will now require a license to export prohibited technologies to intermediary countries.

At the same time, the United States has listened to the calls from companies for fewer blanket restrictions, as industry leaders argue they need to continue selling to the world’s largest chip market. Under the updated rules, companies can export to China nearly all consumer graphics chips, with the exception of the most powerful chips typically used in gaming PCs. A select few consumer chips at the cutting edge will require notification to the U.S. government before export.

The revised rules will not include restrictions on Chinese companies’ access to allied cloud computing services or U.S. The administration will release a request for comments to better understand potential national security risks associated with this access and explore options to address these concerns.

The United States has also extended waivers for South Korean firms Samsung Electronics Co. and SK Hynix Inc., along with Taiwanese chip giant Taiwan Semiconductor Manufacturing Co., to continue shipping some restricted chipmaking technology to their facilities in China.

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