US to break China’s chip industry with export rules

The Joe Biden administration has published a set of export controls targeting China, including a measure to cut the supply of semiconductor chips made anywhere in the world with U.S. equipment.
BE Semiconductor
The new measures could damage China’s chip manufacturing industry by forcing American and foreign companies that use U.S. technology to cut off support for some of China’s leading factories and chip designers, Reuters news report said.

Semiconductor Industry Association (SIA) recently said worldwide sale of semiconductors rose 13.3 percent year-on-year and 0.5 percent quarter-on-quarter to $152.5 billion during the second quarter of 2022.

Growth in sale of Semiconductor in June 2022 was 29 percent into the Americas, 16.1 percent in Japan, 12.4 percent in Europe, 11.9 percent in Asia Pacific/All Other, and 4.7 percent in China as compared to June 2021.

Senior government officials said many of the measures were aimed at preventing foreign firms from selling advanced chips to China or supplying Chinese firms with tools to make their own advanced chips. They conceded, however, that they had not secured any promises that allied nations would implement similar measures.

The expansion of U.S. powers to control exports to China of chips made with U.S. tools is based on a broadening of the foreign direct product rule. It was previously expanded to give the U.S. government authority to control exports of chips made overseas to Chinese telecoms giant Huawei Technologies and later to stop the flow of semiconductors to Russia after its invasion of Ukraine.
Semiconductor revenue in Q2 2022
On Friday, the Biden administration applied the restrictions to China’s IFLYTEK, Dahua Technology, and Megvii Technology, companies added to the entity list in 2019 over allegations they aided Beijing in the suppression of its Uyghur minority group.

The rules published on Friday block shipments of chips for use in Chinese supercomputing systems. The rules define a supercomputer as any system with more than 100 petaflops of computing power within a floor space of 6,400 square feet. The new definition could hit some commercial data centers at Chinese tech giants.

The Semiconductor Industry Association said it was studying the regulations and urged the United States to implement the rules in a targeted way – and in collaboration with international partners – to help level the playing field.

Earlier on Friday, the United States added China’s top memory chipmaker YMTC and 30 other Chinese entities to a list of companies that U.S. officials cannot inspect, ratcheting up tensions with Beijing and starting a 60 day-clock that could trigger much tougher penalties.

Companies are added to the unverified list when U.S. authorities cannot complete on-site visits to determine if they can be trusted to receive sensitive U.S. technology, forcing U.S. suppliers to take greater care when shipping to them.

Under a new policy announced on Friday, if a government prevents U.S. officials from conducting site checks at companies placed on the unverified list, U.S. authorities will start the process for adding them to the entity list after 60 days.

Entity listing YMTC would escalate already-rising tensions with Beijing and force its U.S. suppliers to seek difficult-to-obtain licenses from the U.S. government before shipping them even the most low-tech items.

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