On a visit with reporters, Commerce Secretary Gina Raimondo remarked,” They’re the strongest controls the US has always put in place to destroy the PRC’s ability to produce the most advanced chips used in their military modernization.” Beijing, which has provided silicon companies with tens of billions of dollars in grants and tax breaks in an effort to establish its own cards industry, is likely to be upset by the measures.
The US has grown increasingly concerned that China might develop cutting-edge system chips to create AI-powered defense equipment or other technologies that poses a threat to the US and its allies over the past ten years. The Biden administration has focused its efforts on preventing China from acquiring premium semiconductors manufactured by companies like Nvidia and Taiwan Semiconductor Manufacturing Company Limited ( TSMC).
China, however, showed that it could make high-end chips on its own, so the US turned its attention to the components and tools used by Chinese companies like Huawei to create their own golden. The most extensive portion of that plan so far is the ones made available nowadays. The Biden administration’s efforts to develop the rules, which are the result of decades of negotiations with US friends and business partners, were previously reported by WIRED.
In response to the planned measures, Mao Ning, a spokeswoman for China’s overseas government, accused the United States last year of “overstretching the concept of national surveillance”, and using export controls to reduce China. At a regularly scheduled press conference, Mao stated that” these actions seriously violate the laws of the market economy and the principles of fair competition.” They also threaten the stability of the world’s industrial and supply chains.
A relatively obscure trade regulation that covers goods made in other countries with US technology, software, or components has been updated to the Foreign Direct Product Rule ( FDP ), one of the most significant changes. Previously, only foreign-made chip manufacturing equipment and tools with more than 25 percent of US components were subject to FDP. That means that any American technology that was used to develop, let’s say, a lithography tool in the Netherlands or a memory component in South Korea will now be subject to US export controls.
The Commerce Department announced that it would add 140 Chinese businesses to its so-called entity list, which requires that other businesses obtain special licenses to provide them with American software or goods. The new additions include Chinese tool manufacturers, fabs, and investment companies” that are acting at the behest of Beijing to further the PRC’s advanced chip goals”, according to a press release.
The problem with the entity list, however, is that it’s easy to circumvent. The lines between numerous large corporations can occasionally become tangled, and some of them have extensive networks of existing subsidiaries that may not all be subject to US export controls. The current conflict involving Chinese chip manufacturer Semiconductor Manufacturing International Corporation ( SMIC ), whose most cutting-edge production line has already been deemed illegal by the US government, serves as an especially illustrative illustration.
House Foreign Affairs Committee Chair Michael McCaul wrote a letter to the Commerce Department last month pointing out that only a “wafer bridge” that is “designed to support frictionless transfers across facilities” kept SMIC’s high-end production line from another non-sanctioned legacy facility, which is free to purchase any type of chip manufacturing equipment.
With these latest measures, the US government is trying to close these kinds of loopholes. The Commerce Department also released new “red flag” guidelines, which are essentially hypothetical things businesses should watch out for when doing business with another company in the chips industry, in addition to the entity list updates and restrictions on equipment and tools.
A senior Biden administration official said that one instance of a red flag is whether the business involved is involved in a relationship or not with another sanctioned organization through a bridge.
