Rules will slow efforts to obtain semiconductors for supercomputers and military use
October 4, 2022
Demetri Sevastopulo in Washington, Richard Waters in San Francisco and Kathrin Hille
As originally appeared in Financial Times.
The US is preparing to introduce sweeping export controls in an effort to slow Chinese efforts to obtain semiconductors and chipmaking equipment for supercomputers and other military-related applications.
According to several people familiar with the situation, the commerce department is poised to announce restrictions that would essentially bar US companies from selling cutting-edge technology to Chinese groups and would severely limit the ability of non-US companies to sell products that use US technology to customers in China.
The controls are the latest effort to prevent China from using American technology to develop military programmes from quantum computing to hypersonic weapons. The US is trying to prevent Chinese companies from providing American technology to the People’s Liberation Army through Beijing’s “civil-military fusion” plan.
The restrictions are being tailored to make it harder for Chinese chip manufacturers — including Semiconductor Manufacturing International Corporation, Yangtze Memory Technologies Co, and ChangXin Memory Technologies — to close the big technological gap with rivals in the US, Europe and elsewhere in Asia.
The Financial Times reported earlier this year that YMTC appeared to be supplying Huawei, the telecoms equipment company, with chips in violation of US export controls.
“The US government wants granular control over any US technology used for semiconductor manufacturing. It wants to be able to veto the use by, or exports to, specific companies in China across the board,” said Paul Triolo, a technology expert at Albright Stonebridge Group.
The US will introduce two rules, according to one person familiar with the situation. The first is designed to stop China securing advanced chips for supercomputers and artificial intelligence applications.
China launched its first exascale supercomputer last year, pulling ahead of the US. Most of the processors powering such supercomputers are designed by companies such as Tianjin Phytium Information Technology, but they cannot yet be manufactured in China. The US blacklisted Phytium last year after it emerged that some of its chips were produced by Taiwan Semiconductor Manufacturing Company.
Two of the people familiar with the plan said the US would set a threshold of 14 nanometres, which would prevent companies from exporting leading-edge chip technology to China. The first rule will also restrict the export of semiconductor-making equipment.
The administration will use the “Foreign Direct Product Rule”, a mechanism that was first used against Huawei. It bars companies from selling products that use US technology without obtaining an export licence — which is usually hard to secure — from the commerce department.
Washington will also implement a second rule that puts foreign countries on notice that companies will be put on an export blacklist — known as the “entity list” — if they do not co-operate with efforts to make sure that the groups are engaging in “secure trade” and not involved in violating other export controls.
Eric Sayers, managing partner at security consultancy Beacon Global Strategies, said the overall package was a “bold” move. “It will buy the [Joe] Biden team some goodwill with China hawks on Capitol Hill who have been frustrated with the slow movement of export control policy,” he said.