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

(Reuters) – The Biden administration on Friday published a comprehensive set of export controls, including a measure to isolate China from some semiconductor chips made anywhere in the world with U.S. tools, dramatically expanding their reach in an effort to slow technology in Beijing. and military progress.

The rules, some of which take effect immediately, build on the restrictions sent in letters earlier this year to major tool makers KLA Corp. (KLAC.O)Lamm Research Corporation (LRCX.O) And Applied Materials Company (AMAT.O)effectively requiring them to stop shipments of equipment to wholly-owned factories in China that produce advanced logic chips.

The set of measures may amount to the largest shift in US policy toward shipping technology to China since the 1990s. If effective, it could set the Chinese chip industry back for years by forcing US and foreign companies that use US technology to cut support from some of China’s leading factories and chip designers.

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Briefing reporters Thursday to review the rules, senior government officials said many of the measures sought to prevent foreign companies from selling advanced chips to China or providing Chinese companies with tools to make their own advanced chips. But they acknowledged that they had not yet received any promises that the allied nations would implement similar measures and that discussions with those nations were continuing.

“We realize that the unilateral controls that we are applying will lose their effectiveness over time if other countries do not join us,” said one of the officials. “And we risk damaging US tech leadership if foreign competitors are not subject to similar controls.”

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The expansion of US authorities to control exports to China of American-made chips is based on the expansion of the so-called foreign direct product base. It was previously expanded to give the US government authority to control exports of overseas-made chips to Chinese telecom giant Huawei Technologies Co Ltd (HWT.UL) and later to stem the flow of semiconductors to Russia after its invasion of Ukraine.

On Friday, the Biden administration applied the expanded restrictions to China’s IFLYTEK, Dahua Technology and Megvii Technology, companies that were added to the entity list in 2019 over allegations that they helped Beijing suppress the Uighur minority group.

The rules published on Friday also ban shipments of a wide variety 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 floor space of 6,400 square feet, a definition that two industry sources said could also infect some commercial data centers of Chinese tech giants.

US Senate Democratic leader Chuck Schumer welcomed the announcement, saying the rules would protect our country’s innovations from China’s greedy actions.

The Semiconductor Industry Association, which represents chip makers, said it was studying the regulations and urged the US to “implement the rules in a targeted manner – and in cooperation with international partners – to help level the playing field.”

Earlier on Friday, the United States added China’s largest memory chip maker YMTC and 30 other Chinese entities to a list of companies that US officials cannot screen, escalating tensions with Beijing and targeting a company that has long annoyed the Biden administration. Read more

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The “unchecked list” is a potential introduction to stricter economic blacklists, but companies that comply with US inspection rules could be removed from the list. On Friday, US officials removed nine such companies, including China’s Wuxi Biologics unit, which makes components for AstraZeneca Plc. (AZN.L) COVID-19 vaccine.

The new regulations will also severely restrict the export of US equipment to Chinese memory chip makers and formalize messages sent to Nvidia Corp. (NVDA.O) and Advanced Micro Devices Inc (AMD) (AMD.O) Restrict shipments to China of chips used in supercomputing systems that countries around the world rely on to develop nuclear weapons and other military technologies.

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

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Reporting by Stephen Niles in San Francisco and Karen Freefield in New York Additional reporting by David Shepardson in Washington Editing by Alexandra Alper, Chris Sanders and Matthew Lewis

Our criteria: Thomson Reuters Trust Principles.

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