October 3, 2022
As originally appeared in The Washington Post.
The Biden administration is preparing new rules aimed at curbing China’s advanced computing and chip production capabilities — the U.S. government’s most significant effort to date to restrain China’s development of technologies critical for its military advancement.
The rules, scheduled to be announced as soon as this week, will sweep more broadly than a draconian export control previously applied to Chinese tech giant Huawei.
The use of the so-called foreign direct product rule will prevent companies anywhere in the world from selling certain advanced computing chips to Chinese buyers without a U.S. government license if the companies use American technology to make the chips, according to several people briefed on the measure, who spoke on the condition of anonymity to discuss the still-unannounced plans.
The rule would apply to semiconductor chips used in supercomputers and certain artificial intelligence applications.
Such advanced computing systems can be used to develop nuclear weapons, hypersonic missiles, and missile defenses, officials said. A loss of U.S. leadership here would “severely compromise” national security and “undermine profitable parts of the U.S. economy,” according to a 2016 report by the National Security Agency and the Department of Energy.
The foreign direct product rule is a particularly harsh trade measure because the rule imposes restrictions not just on chipmakers in the United States, but on any company or factory in the world that relies on American equipment or software to make chips. There is hardly a semiconductor on the planet today that is not made with American tools or designed with software that originated in the United States.
The administration also wants to restrict the export to China of chip-making tools used by Chinese companies such as the country’s leading memory chipmaker, YMTC, and the leading Chinese producer of processors, SMIC. If the rule is enacted as currently envisioned, it would cut off access to American manufacturing and design tools for chips that are 14 nanometers in size or smaller.
“What they’re doing is a stark departure from 30 years of policy,” said Eric Sayers, managing director at Beacon Global Strategies, a national security consulting firm. “It’s a form of technology containment. Not just to stay ahead of China, but to degrade their ability to try to catch up with us.”