The US Department of Commerce introduced a sweeping package of export controls on Monday designed to weaken China’s domestic semiconductor ecosystem and undermine the country’s ability to manufacture advanced chips locally. The new regulations prevent China from accessing 24 types of chip manufacturing equipment and three software programs, and place restrictions on the sale to China of high-bandwidth memory, or HBM, an advanced kind of 3D-stacked computer memory component that is often used in customized AI chips.
“They’re the strongest controls ever enacted by the US to degrade the PRC’s ability to make the most advanced chips that they’re using in their military modernization,” Commerce Secretary Gina Raimondo said on a call with reporters. The measures are likely to enrage Beijing, which has given tens of billions of dollars worth of subsidies and tax breaks to semiconductor firms in the hopes of building out its own chips sector.
Over the past decade, the United States has grown increasingly concerned that China could use cutting-edge computer chips to build AI-powered military weapons or other technology that threatens the US and its allies. To address the issue, the Biden administration has concentrated its efforts on preventing China from acquiring high-end semiconductors made by companies like Nvidia and Taiwan Semiconductor Manufacturing Company Limited (TSMC).
But China proved it was capable of manufacturing high-end chips on its own, so the US shifted its attention to going after the components and equipment that Chinese companies like Huawei still rely on to produce their homegrown silicon. The measures announced today are the most far-reaching part of that strategy so far. WIRED previously reported the Biden administration was working on the provisions, which are the result of months of negotiations with US allies and industry partners.
In response to the anticipated measures, Mao Ning, a spokesperson for China’s foreign ministry, accused the United States last week of “overstretching the concept of national security,” and using export controls to suppress China. “Such moves seriously violate the laws of market economy and the principles of fair competition, disrupt international economic and trade order and the stability of global industrial and supply chains,” Mao said at a regularly scheduled press conference.
One of the most significant changes introduced is an update to the Foreign Direct Product Rule (FDP), a relatively obscure trade regulation that covers goods made in other countries with US technology, software, or components. Previously, only foreign-made chip manufacturing equipment and tools with more than 25 percent of US components were subject to FDP. That threshold is now being abolished, meaning that if any American technology was used to create, say, a lithography tool in the Netherlands or a memory component in South Korea, it will be subject to US export controls.
The shift is a big deal, since US technology is everywhere—just look at the ubiquity of Microsoft Windows or Google’s Android software. The semiconductor industry publication Semianalysis hypothesized in October that removing the 25 percent threshold could be devastating for Chinese chip manufacturing plants, commonly referred to as fabs. “At its own discretion the US could stop Chinese capacity expansion immediately, and existing fabs would be severely handicapped if not inoperable within six months,” Semianalysis reported.
The Commerce Department said it was also adding 140 Chinese companies to its so-called entity list, which requires other companies to acquire special licenses to supply them with software or products from the United States. 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. Many large corporations have extensive networks of existing subsidiaries, not all of which may be subject to US export controls, and the lines between them can sometimes get blurry. A particularly illustrative example is the current controversy over Semiconductor Manufacturing International Corporation (SMIC), a Chinese chip manufacturer whose most advanced production line has already been sanctioned by the US government.
In a letter to the Commerce Department last month, House Foreign Affairs Committee chair Michael McCaul noted that only a “wafer bridge” that is “designed to support frictionless transfers across facilities” separated SMIC’s high-end production line from another non-sanctioned legacy facility that is free to purchase whatever chip manufacturing equipment it wants.
With these latest measures, the US government is trying to close these kinds of loopholes. In addition to the entity list updates and restrictions on equipment and tools, the Commerce Department also released new “red flag” guidelines, essentially hypothetical circumstances that companies should look out for when considering doing business with another company in the chips industry.
According to a senior Biden administration official, one example of a red flag is whether the company in question is connected to another sanctioned organization by, well, perhaps some sort of bridge.
Source : Wired
