The United States on Monday, December 2, launched the third restrictive measures against China’s semiconductor industry in the last three years, reducing the scope of export opportunities to this Asian country.
Washington’s mentioned decision affected 140 companies, including, among them, the manufacturer of equipment for making microcircuits, Naura Technology Group.
It is worth noting that the semiconductor industry has actually become one of the main and most sensitive areas within the framework of the current tension between the United States and China. In this context, it is important to mention that chips are what can be described as a kind of basic material element of advanced technologies and a new economy driven by these technologies. Microcircuits are used in approximately all modern devices, including smartphones and laptops. Chips are also necessary for training and ensuring the process of subsequent functioning of artificial intelligence systems. AI is actually the main technology of modernity. Futurological forecasts provide that artificial intelligence can become an independent form of consciousness that exists in the digital dimension and surpasses the human mind in terms of cognitive abilities, including in the context of learning of the world as a kind of global cosmogonic space of the being, not limited to the territory of habitation of mankind civilization. The realization of these more than-ambitious prospects is impossible without such a basic component as a chip.
It is also worth noting that the ability to produce microcircuits or the scale of access to chips in the era of global digitalization and high technology determines the economic potential of a country and has an impact on its position in the international political arena.
The United States has recently been making efforts to curb the momentum of the Chinese semiconductor industry. It is worth noting that appropriate measures in the future may have a sensitive impact on the economic potential of the Asian country as a whole.
New restrictions from the United States, in particular, hit Chinese chip toolmakers such as Piotech, ACM Research, and SiCarrier Technology. To a large extent, Washington’s new package of corresponding solutions is aimed at shipments of advanced memory microcircuits and tools for manufacturing appropriate products.
The restrictive measures announced on Monday are one of the latest efforts by the administration of the President of the United States Joe Biden as part of the implementation of the desire to stymie China to gain access to chips and the means of making microcircuits. It is worth noting that Washington explains its respective actions with national security considerations. US policymakers claim that China can use chips to develop artificial intelligence for military purposes. Also, according to them, microcircuits can contribute in other ways to strengthen the military potential of the Asian country.
The new restrictive measures came into force a few weeks before the inauguration of Donald Trump, who won the United States presidential election last month. Currently, the prevailing opinion among experts is that he will retain most of the tough decisions of the administration of current US President Joe Biden regarding China.
The measures announced on Monday by Washington against Beijing include restrictions on shipments to the Asian country of high bandwidth memory chips, critical for high-end apps such as artificial intelligence training. Also, in this case, curbs are provided for 24 additional tools for the production of microcircuits and three software tools. Moreover, restrictions were imposed on the export of chip-making equipment manufactured in Singapore and Malaysia.
US Commerce Secretary Gina Raimondo said that Washington’s mentioned actions are aimed at preventing China from advancing a domestic semiconductor manufacturing system that it will use to support its military modernization.
According to media reports, restrictions on shipments of chip-making tools to an Asian country are likely to affect such United States companies as Lam Research, KLA, and Applied Materials. It is also expected that these measures will impact the Dutch manufacturer of equipment for the production of microcircuits ASM International.
The new restrictions apply to almost two dozen semiconductor companies, two investment firms, and more than 100 makers of chip manufacturing tools in China.
According to media reports, Washington’s measures also affect Swaysure Technology Co, Si’en Qingdao, and Shenzhen Pensun Technology Co, which have been cooperating with Huawei Technologies, which has been one of the main targets of US sanctions against an Asian country for several years. It is worth noting that Huawei was able to recover over time after massive restrictions from the United States. Currently, this company is the leader in the development and production of advanced chips in China.
On Monday, Chinese foreign ministry spokesman Lin Jian, commenting on the new restrictive measures by the United States, said that Washington’s appropriate behavior undermines the international economic trade order and disrupts global supply chains. Also, in this context, it was noted separately that China will take measures to safeguard the rights and interests of its companies.
The Asian country’s сommerce ministry described the restrictive decisions of the United States as a clear example of economic coercion and non-market practices. The relevant wording is contained in the official statement, which was published on the website of this Ministry.
In recent years, Beijing has stepped up its pursuit of self-sufficiency in the semiconductor sector. It is worth noting that the relevant actions in a certain sense are what can be described as a forced measure. To further develop its own technological potential within the framework of intensive cooperation with foreign suppliers, China has very few solutions, since the United States and some of Washington’s allies have limited exports of advanced chips and equipment for the production of these microcircuits. Moreover, the current increase in tension in the space of geopolitical relations actualizes the issue of technological sovereignty. Against the background of external constraints, autonomy is the only way to further development. It is also worth mentioning the period of the coronavirus pandemic when international supply chains were disrupted due to an emergency in the global health system. Against the background of the relevant state of affairs, the importance of autonomy, providing for self-sufficiency, in the manufacturing sector and the technological area was highlighted. China has already achieved certain results on the path to the mentioned autonomy, but at the same time, the Asian country still continues to lag behind such chip industry leaders as US Nvidia, which develops cut-edge microcircuits, necessary, among other things, for training and subsequent operation of artificial intelligence systems, and Dutch ASML, which makes equipment for semiconductor production.
Also, the United States is poised to impose additional restrictions on Semiconductor Manufacturing International Co. (SMIC). The mentioned company is the largest Chinese contract chip maker. SMIC has been added to the US entity list, which marks the boundaries of the curbs spreading area, in 2020. At the same time, restrictions on licenses for shipments of goods worth billions of dollars did not apply to this manufacturer.
Besides, Washington for the first time imposes curbs that concern companies investing in the chip industry. In this case, firms such as Wise Road Capital, Wingtech Technology Co, and JAC Capital are meant. The US Commerce Department explained the mentioned measures by saying that the specified companies contribute to the efforts of the Chinese government to acquire entities with sensitive semiconductor manufacturing capability critical to the defense industrial bases of the United States and its allies with the objective of relocating these entities to an Asian country.
It is worth noting that formal interaction with firms added to the entity list is not prohibited. In this case, it is provided that cooperation is possible upon receipt of a license. At the same time, the experience implemented in the plane of practical actions indicates that the corresponding permission is not provided in the vast majority of cases. For this reason, from the point of view of the actual state of affairs, it is appropriate to call restrictions a ban, and not something like a special system for regulating export activities.
New curbs on the part of the United States towards China can also be considered as an action committed in the context of the logic of the current configuration of the situation in the space of geopolitical relations. In this case, there is not a particular case of interaction, but restrictions at the level of interstate relations. The curbs also apply to the chip industry, which is critically important both from the point of view of the potential for technological development and in terms of the impact on the economy as a whole. In the geopolitical context, the most important thing in this case is that the restrictions clearly do not favor cooperation between the two major world capitals as political and economic centers, forming conditions for further deterioration of their relations. The corresponding tendency is a negative but still an organic manifestation of the current international tension.
For China, restrictions are a complicating factor in an already difficult situation. Currently, the local economic system, which is the second largest in the world, is facing a gradual slowdown in the dynamic of growth against the background of such adverse circumstances as the crisis in the real estate sector, weak domestic demand, and falling investor confidence.
According to media reports, one aspect of the new package of curbing measures by the United States against China, concerning the foreign direct product rule, may hurt some US allies by limiting shipments of goods of their companies to the Asian country.
The new rule will expand Washington’s powers to restrict the export of chip manufacturing equipment. The relevant powers now apply not only to US companies but also to firms from the Netherlands and Japan. According to information released by the media, Washington may impose restrictions on some Chinese-based chip production plants.
Besides, the mentioned rule concerns equipment for manufacturing microcircuits that were made in Singapore, Israel, Malaysia, South Korea, and Taiwan.
The expanded foreign direct product rule will apply to 16 companies on the entity list. These firms are seen as the most important to China’s most advanced chipmaking ambitions.
The specified rule will also lower to zero the amount of the US content that determines when control by the United States extends to certain foreign items. In this case, Washington gets the opportunity to regulate any items supplied to China from abroad if any US chip is used in it.
The new export control standards were announced after a long discussion on the relevant issue between the United States, Japan, and the Netherlands. The main manufacturers of chip-making equipment are currently based in these countries.
The Dutch government said it will study new restrictive measures, noting that each country has its own national security and export control considerations.
ASML has released a message on its website stating that the curbs announced by the United States will not have a significant impact on its business. At the same time, the company noted that if the Dutch government conducts a similar security assessment, it may face certain new regulations regarding the export of some chip manufacturing tools.
The United States plans to exempt countries that adopt similar controls. The relevant information was published by the media with reference to insiders.
Another new rule in the curbs package announced by the United States limits memory used in artificial intelligence chips that correspond with what is known as HBM 2 and higher, technology made by South Korea’s Samsung and SK Hynix, and US-based Micron. As reported by the media, citing industry sources, the mentioned restrictions are likely to affect only Samsung. Currently, this company sells about 20% of its high-bandwidth memory chips in China. The appropriate information was also published by the media with reference to insiders.
The restrictive measures announced on Monday are the third major package of relevant decisions regarding chip exports imposed by the Joe Biden administration.
In October 2022, the United States published a sweeping set of controls on the sale and production of certain high-end microcircuits. Experts have described these actions by Washington as the biggest shift in its technology policy towards Beijing since the 1990s.
As part of the reaction to the new restrictive measures by the United States, on Tuesday, December 3, four leading industry associations in China said that local companies should be careful when buying US chips since these products are no longer safe. Also, in this case, a recommendation was given to buy microcircuits on the domestic market.
It is worth noting that the mentioned statement is an example of rare coordination in responding to restrictive measures by the United States.
In this case, it is noteworthy that the associations did not elaborate on their statements. The implication is that explanations have not been provided for why US chips are not secure and can be characterized as unreliable. The mentioned associations represent some of China’s largest industries, including telecommunications, digital economy, automotive, and semiconductor areas. In total, 6,400 companies are members of these associations.
The recommendations from the associations may become an impact factor on the Chinese sales of US chipmaking giants like Nvidia, Intel, and AMD. It is worth noting that the history of the presence of these companies in the Asian country market continues, despite the export control regime. China is one of the largest markets in the world, and the termination of interaction with this space means sensitive financial losses for firms.
The statements of the associations and restrictive measures by Washington are a new round of growing global trade tensions, which is largely a process consistent with the logic of the current state of affairs in the geopolitical space, consisting of tendencies of consecutive deterioration of cooperation between world capitals. It is possible that a new stage of the mentioned tension will provoke a subsequent intensification of appropriate practices.
The Internet Society of China urged domestic companies to think carefully before purchasing US chips. Also, in this case, an appeal was made to seek cooperation with manufacturers of microcircuits from other countries and regions, except for the United States. The relevant information was published on the official account of the Internet Society of China on the WeChat virtual platform. In this case, it was noted that export controls by the United States had caused significant harm to the health and development of the Asian country’s Internet industry.
The China Association of Communication Enterprises said it no longer identifies US chips as reliable or safe. Also in this context, it was noted that the Chinese government should investigate how secure the supply chain of the country’s critical information infrastructure was.
It is worth noting that Beijing is also taking certain regulatory actions against US companies. Last year, the Chinese authorities conducted an audit of the activities of the manufacturer of memory chips Micron. These actions were committed under the pretext of cybersecurity. Later, Beijing banned Micron from selling its chips to the main domestic industries. This decision affected the financial performance of the company.
Intel’s activities were also checked in an Asian country. The Cybersecurity Association of China stated that the mentioned US company constantly harmed the national security and interests of the Asian country.
It is possible that, against the background of stricter export control measures by the United States in China, investigations of the activities of the US firms will become more frequent, and the results of the relevant procedures will be more negative for foreign businesses.
As we have reported earlier, Washington Orders TSMC to Halt Shipments to China of Some Chips.
