On Monday, the United States enacted its third major round of export restrictions targeting China’s semiconductor industry in just three years. The latest measures affect 140 Chinese companies, including major chip equipment manufacturers like Naura Technology Group, Piotech, and ACM Research, along with key suppliers in the semiconductor production and advanced memory technologies sectors.

U.S. Export Restrictions on China’s Semiconductor Industry: National Security Concerns

The Biden administration’s move is part of ongoing efforts to limit China’s ability to advance its semiconductor capabilities, particularly in areas critical to military applications and the development of artificial intelligence (AI) technologies. Commerce Secretary Gina Raimondo emphasized that the goal is to prevent China from strengthening its domestic chip production infrastructure, which could be leveraged for military and AI advancements.

These new restrictions come just weeks before President-elect Donald Trump’s inauguration, continuing the previous administration’s hardline stance on China. The restrictions specifically target high-bandwidth memory (HBM) chips, which are vital for AI processing, high-performance computing, and military applications, as well as the chipmaking equipment needed to produce advanced semiconductors.

Expanded Restrictions on U.S. and Foreign Chipmakers

As part of these new export controls, the U.S. has broadened its restrictions on critical chipmaking tools used to produce advanced semiconductors. Companies like Lam Research, KLA, and Applied Materials—all based in the U.S.—are expected to be impacted by the curbs. The export restrictions also extend to foreign companies, including ASM International (Netherlands), Tokyo Electron (Japan), and companies in Singapore and Malaysia that supply equipment to China’s semiconductor manufacturers.

In addition, U.S. sanctions now target Chinese companies such as Swaysure Technology, Si'En Qingdao, and Shenzhen Pensun Technology, many of which work with Huawei Technologies—a key player in China’s push for semiconductor self-sufficiency.

Impact on Chinese Semiconductor Firms and Investments

For the first time, U.S. export controls have been applied to Chinese private equity firms. Companies like Wise Road Capital, Wingtech Technology, and JAC Capital are now included on the U.S. Entity List, which restricts U.S. companies from selling to them without a special license—an action that typically results in denials.

This move is part of the U.S.’s broader strategy to prevent China from acquiring sensitive semiconductor technologies that could be used for military purposes. China has strongly criticized the U.S. for "economic coercion" and non-market practices, vowing to protect its tech industry from these restrictions.

The Expanded Foreign Direct Product Rule: Global Implications

A significant component of the new U.S. export controls is the expansion of the Foreign Direct Product Rule. This rule allows the U.S. to block shipments of semiconductor manufacturing equipment made by companies in countries like Japan, Netherlands, and South Korea if the equipment contains any U.S. technology.

For the first time, the rule applies to equipment with even minimal U.S. content, effectively limiting global exports of chipmaking technology to China. However, Japan and the Netherlands have been exempted from these restrictions after extensive discussions with the U.S. ASML, the Dutch supplier of chipmaking equipment, is currently assessing how the new regulations will affect its operations.

U.S. Restrictions on AI Memory Chips from South Korea and the U.S.

One of the major targets of the new export controls is high-bandwidth memory (HBM) chips, which are essential for AI processing and powering advanced artificial intelligence systems. These chips, primarily manufactured by Samsung and SK Hynix (South Korea) and Micron (U.S.), are pivotal to AI technologies and high-performance computing.

Industry experts predict that Samsung will be significantly impacted by these new restrictions, as approximately 30% of its HBM sales are directed to China. This could have far-reaching effects on China’s efforts to develop its AI and semiconductor sectors.

Long-Term Strategy: The U.S. Aims to Contain China’s Semiconductor Industry

This latest round of export restrictions is the third major move by the U.S. to curtail China’s progress in semiconductor manufacturing. The first major action occurred in October 2022, when the U.S. restricted the sale of advanced chips to China. Together, these actions represent part of a long-term strategy to slow China’s ambitions in semiconductor technology, which is increasingly seen as a key factor in both commercial and military competitiveness.

While China is striving for semiconductor self-sufficiency, it remains several years behind global leaders like Nvidia, Intel, and ASML in developing the most advanced chips and manufacturing technologies. The latest U.S. export controls further complicate China’s goal of catching up with the West in this critical technological field.

Key Takeaways: U.S. Export Restrictions on China’s Semiconductor Industry

• The U.S. has imposed new export restrictions on 140 Chinese companies involved in semiconductor manufacturing and AI chip production.
• The focus of the restrictions is on high-end semiconductor equipment and HBM chips, essential for AI, computing, and military applications.
• U.S. companies such as Lam Research, KLA, and Applied Materials will be impacted by these curbs, along with foreign companies like ASM International.
• China has criticized the U.S. for "economic coercion" and vowed to protect its tech sector.
• The expanded Foreign Direct Product Rule allows the U.S. to restrict foreign-made equipment containing U.S. technology, with exemptions for Japan and the Netherlands.
• These actions reflect the U.S.’s ongoing efforts to limit China’s advancement in semiconductor technology, crucial for both commercial and military uses.

Source: Reuters.com