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

Oct 7 (Reuters) – 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 U.S. equipment, broadening considerably its reach in its attempt to slow down Beijing’s technology. and military advances.

The rules, some of which take effect immediately, build on restrictions sent in letters earlier this year to major tool makers KLA Corp. (KLAC.O)Lam Research Corp. (LRCX.O) and Applied Materials Inc. (AMAT.O)effectively forcing them to suspend equipment shipments to wholly Chinese-owned factories producing advanced logic chips.

The series of measures could be the biggest change in US policy on shipping technology to China since the 1990s. If effective, they could stifle China’s chipmaking industry by forcing US and foreign companies using US technology to cut support for some of China’s major chip factories and 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 policies refer to regulations strict rules of the height of the Cold War.

“China isn’t going to give up on chip manufacturing… but it’s really going to slow them down (down).”

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. own advanced chips. They acknowledged, however, that they had obtained no promises that allied nations would implement similar measures and that discussions with those nations were ongoing.

“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.”

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 extended to give the US government the power to control exports of foreign-made chips to Chinese telecommunications giant Huawei Technologies Co Ltd (HWT.UL) and later to stop the flow of semiconductors to Russia after its invasion of Ukraine.

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

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 floor area, a definition that two industry sources say could also affect some commercial data centers at companies. Chinese tech giants.

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.

Companies around the world started to struggle with the latest US action, with shares of semiconductor manufacturing equipment makers falling.

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”.

Earlier on Friday, the United States added China’s leading memory chip maker YMTC and 30 other Chinese entities to a list of companies that U.S. officials cannot inspect, raising tensions with Beijing and triggering a 60-day clock that could lead to much tougher penalties. Read more

Companies are added to the unverified list when US authorities cannot conduct on-site visits to determine if they can be trusted to receive sensitive US technology, forcing US suppliers to be more careful when shipping to them.

Under a new policy announced on Friday, if a government blocks US officials from performing site checks at companies on the unverified list, US officials will begin the process to add them to the entity list after 60 days.

Listing YMTC entities would aggravate already growing tensions with Beijing and force its US suppliers to seek hard-to-obtain licenses from the US government before shipping even the most rudimentary items to them.

The new regulations will also severely restrict the export of U.S. equipment to Chinese memory chip makers and formalize letters sent to Nvidia Corp. (NVDA.O) and Advanced Micro Devices Inc (AMD) (AMD.O) 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.

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

Reporting by Stephen Nellis in San Francisco and Karen Freifeld in New York Additional reporting by David Shepardson in Washington Editing by Alexandra Alper, Chris Sanders, Matthew Lewis and Richard Chang

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