China’s semiconductor industry rocked as US export controls force massive layoffs

China’s semiconductor industry has been rocked by the mass layoffs of American workers after the administration of US President Joe Biden announced new restrictions.

The export controls, which the US said were necessary to “protect national security and US foreign policy interests”, limit China’s ability to “purchase and manufacture certain high-quality chips used in military applications”.

The restrictions prohibit the export of US semiconductor equipment that cannot be supplied by any foreign competitor. There is also a licensing requirement for the export of US tools or components to factories in China.

And critically, any US citizen or entity must obtain approval from the US Department of Commerce before providing support to Chinese factories.

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Anyone who violates the sanctions can be arrested by the US Department of Justice.

According to an expert, overnight controls caused the “complete collapse” of China’s semiconductor industry.

“This is what destruction looks like: China’s semiconductor industry was reduced to zero overnight,” wrote an entrepreneur tweeting under the name Lidang in a thread translated by Jordan Schneider, a senior analyst at Rhodium Group.

“A lot of people don’t know what happened yesterday,” Lidang explains.

“To put it simply, Biden has forced all Americans working in China to choose between quitting their jobs and losing US citizenship.

“Every US executive and engineer working in China’s semiconductor industry resigned yesterday, crippling China’s manufacturing overnight.

“One round of Biden sanctions has done more damage than all four years of performative sanctions under” [former US president Donald] Trump.”

The Financial times reported that US companies Lam Research, Applied Materials and KLA Corporation had immediately taken steps to comply with the new rules.

Lam Research has begun withdrawing employees from China-based memory chip maker Yangtze Memory Technologies Corp, telling its employees to “stay away” from Chinese manufacturing companies for now.

In a letter, the Dutch multinational ASML wrote that the new regulations prohibit the support of certain factories in China by American persons.

“As a result, ASML US employees – including US citizens, green card holders and foreigners residing in the US – are prohibited from providing certain services to advanced [fabrication plants] in China.

“Starting at midnight tonight, ASML US employees must – directly or indirectly – refrain from servicing, shipping or supporting customers in China until further notice.”

A spokesman for the China Semiconductor Industry Association said the “unilateral measure” would further hurt the semiconductor industry’s global supply chain.

“More importantly, it will create an atmosphere of uncertainty, which will negatively affect the trust, goodwill and spirit of cooperation that the players of the global semiconductor industry have carefully cultivated over the past few decades,” he said.

Chinese Foreign Ministry spokeswoman Mao Ning accused the US of “abusing export control measures to willfully block and hinder Chinese businesses”.

“Such a practice goes against the principle of fair competition and international trade rules,” she said.

“It will not only harm the legitimate rights and interests of Chinese companies, but also the interests of American companies.”

The US move is a major escalation of tensions between Beijing and Washington.

Abishur Prakash, co-founder of the Center for Innovating the Future, told CNBC it was a big shift.

“There is no going back to the way it was,” he said.

“With the latest move, the gap between the US and China has now become so wide that there is no turning back.”

Share prices of Chinese tech giants and companies with offices in China plummeted after the US announcement.

The US said that if China were allowed to produce advanced semiconductors, Beijing would be able to produce advanced military systems, including weapons of mass destruction, improve the speed and accuracy of its military decision-making, planning and logistics, as well as its autonomous military systems and human rights violations. to commit.

Alan Estevez, Secretary of State for Trade for Industry and Security, said: “The threat environment is constantly changing and we are updating our policies today to ensure we meet the challenges of the [People’s Republic of China] as we continue our outreach and coordination with allies and partners.”

The US is trying to revive its semiconductor manufacturing capacity and recently passed the Chips and Science Act to reduce reliance on Taiwan-made chips.

Micron recently announced plans to open a $160 billion chip factory in New York.

Semiconductors are a critical part of a range of modern devices and are also used in artificial intelligence and for advanced military programs.

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