US aims to hobble China’s chip industry with sweeping new rules

The Biden administration on Friday issued a sweeping set of export controls, including a measure to cut China off from certain semiconductor chips made anywhere in the world with American tools, greatly expanding its reach in its bid slow down Beijing’s technological and military advances.

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

“It will set the Chinese back years,” said Jim Lewis, a technology and cybersecurity expert at the Center for Strategic and International Studies (CSIS), a Washington DC-based think tank, who said the policies are reminiscent of regulations strict. from the height of the Cold War.

“China isn’t going to give up on chip manufacturing… but it will really slow them down [down].”

The rules, some of which take effect immediately, build on restrictions sent in letters earlier this year to major toolmakers KLA Corp, Lam Research Corp and Applied Materials Inc, effectively requiring them to suspend shipments of equipment to fully Chinese-owned factories producing advanced products. logic chips.

During a briefing with reporters on Thursday to outline the rules, senior government officials said many of the measures were aimed at preventing foreign companies from selling advanced chips to China or providing Chinese companies with tools to make their own. advanced chips. They acknowledged, however, that they had not yet secured any promises that allied nations would implement similar measures and that discussions with those nations were continuing.

“We recognize that the unilateral controls we put in place will lose their effectiveness over time if other countries don’t join us,” an official said. “And we risk undermining American technological leadership if foreign competitors are not subject to similar controls.”

“Pretty amazing” potential impact

The expansion of US powers to control exports to China of chips made with US tools is based on an expansion of the so-called foreign direct product rule. It was previously expanded to give the US government the power to control exports of foreign-made chips to Chinese telecommunications giant Huawei Technologies Co Ltd and later to stop the flow of semiconductors to Russia after its invasion. from Ukraine.

On Friday, the Biden administration applied the broad restrictions to Chinese companies IFLYTEK, Dahua Technology and Megvii Technology, firms added to the Entity List in 2019 following allegations they helped Beijing suppress its Uyghur minority group.

Rules may hit data centers of some of China’s tech giants [File: Florence Lo/Illustration/Reuters]

The rules released on Friday also block shipments of a wide range of chips for use in Chinese supercomputing systems. The rules define a supercomputer as any system with more than 100 petaflops of computing power in a 6,400 square foot (595 square meter) floor area, a definition which two industry sources say could also affect some centers business data at Chinese tech giants.

US Senate Democratic Leader Chuck Schumer welcomed the announcement, saying the rules would “protect our nation’s innovations from predatory actions by China.”

Eric Sayers, a defense policy expert at the American Enterprise Institute, said the move reflected another attempt by the Biden administration to contain China’s advances instead of simply seeking to level the playing field.

“The scope of the rule and the potential impacts are quite astonishing, but the devil will, of course, be in the details of the implementation,” he added.

The Semiconductor Industry Association, which represents chipmakers, said it was studying the regulations and urged the United States to “implement the rules in a targeted manner – and in collaboration with international partners – to help standardize The game’s rules”.

Raise tensions

Earlier on Friday, the United States added major Chinese memory chip maker YMTC and 30 other Chinese entities to a list of companies that US officials cannot inspect, increasing tensions with Beijing and targeting a company that has long troubled the Biden administration.

The “unverified list” is a potential precursor to tougher economic blacklists, but companies that comply with US inspection rules can get off the list. On Friday, U.S. officials cut nine such companies, including a unit of Chinese company Wuxi Biologics, which makes ingredients for AstraZeneca Plc’s COVID-19 vaccine.

The new regulations will also severely restrict the export of US equipment to Chinese memory chip makers and formalize letters sent to Nvidia Corp and Advanced Micro Devices Inc (AMD) limiting shipments to China of chips used in supercomputing systems. on which nations around the world rely. develop nuclear weapons and other military technologies.

Reuters was first to report key details of new restrictions on memory chip makers, including a reprieve for foreign companies operating in China and moves to expand restrictions on shipments to China of KLA’s technologies. Lam, Applied Materials, Nvidia and AMD.

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