US hits China with sweeping technical export controls

The US has introduced sweeping export controls that will seriously complicate efforts by Chinese companies to develop advanced technologies with military applications, in one of the toughest actions President Joe Biden has taken against China.

The trade department on Friday revealed restrictions that will make it very difficult for Chinese companies to acquire or manufacture advanced computer chips and slow down their progress in artificial intelligence.

The measures are also intended to make it much more difficult for China to develop supercomputers with military applications ranging from modeling nuclear weapons to researching hypersonic weapons.

The checks mark another attempt to decouple China from the US on advanced technologies. They come days before the Chinese Communist Party holds its 20th national congress, at which President Xi Jinping is expected to seal a third term as leader.

Paul Triolo, a China and tech expert at Albright Stonebridge, a consulting firm, said the move marked a “major turning point” in US-China relations and the increasingly intense technology competition between the two countries.

“The US has essentially declared war on China’s ability to promote the country’s use of high-performance computing for economic and security gains,” Triolo said.

The controls will affect Chinese companies in several ways. They will ban US companies from exporting critical chip manufacturing tools to China, affecting groups such as Semiconductor Manufacturing International Corp, Yangtze Memory Technologies Co and ChangXin Memory. They will also prohibit US citizens and companies from providing any form of direct or indirect support to semiconductor manufacturing plants in China.

The US has also placed YMTC – along with 30 other Chinese entities – on a list of “unverified” companies, paving the way for possible inclusion on a separate blacklist called the “entity list”, which would effectively ban American companies. provide them with technology.

“The government’s strategy is to deny China the ability to indigenousize its semiconductor industry. If the US is successful, it will pose a huge problem for Beijing’s strategy to be a world-class player,” said Martijn Rasser, a security and technology expert at the Center for a New American Security, a think tank.

To underscore the scope of the controls, the US is using a far-reaching mechanism called the “foreign direct product rule” to make it more difficult for China to develop and maintain supercomputers and AI technology.

The rule — first used by the Trump administration against Chinese tech group Huawei — effectively prohibits any US or non-US company from supplying Chinese entities with hardware or software containing or manufactured with US technology.

But in an effort to reduce supply chain disruptions, the government will make an exception for chip factories in China owned by companies from the US or allied countries that export chips.

“The PRC [People’s Republic of China] has invested resources in developing supercomputing capabilities and aims to become a global leader in artificial intelligence by 2030. It uses these capabilities to track, monitor, and patrol its own citizens, and fuel military modernization,” said Thea Kendler, a senior commerce division. officially. “Our actions will protect American national security.”

Analysts said China’s memory chip makers, including YMTC and ChangXin Memory, would feel the most immediate blow.

“They’re basically doomed,” said Mark Li, a semiconductor analyst at Bernstein in Hong Kong. “It will be very difficult for them to get the equipment they need.

But the ban on semiconductor tool exports could significantly harm Chinese chipmakers in general, as US equipment makers have a stranglehold on a few key niches.

Triolo said there would be “a lot of losers,” including US chip design leaders such as Nvidia and AMD, and toolmakers including Applied Materials and Lam Research. He said the rules would also affect non-US players, including ASML, the Dutch company that produces the most advanced semiconductor tools, and TSMC, the Taiwanese contract foundry company.

A chip industry director said the US was attacking China “from all sides”.

“The amazing thing about this move is that they’ve gathered a whole bunch of tools,” said the director. “They’re not just targeting military applications, they’re trying in every way to block the development of China’s technological power.”

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