US export controls on Chinese semiconductors force suppliers to cut ties

Remark

Western suppliers have begun cutting ties with a number of Chinese chipmakers in response to new US export controls, in another sign of the partial technology segregation imposed by the Biden government to hinder China’s military development.

A major supplier of chip-making equipment, ASML, told US workers to stop installing or maintaining equipment at a Chinese chip factory while it goes through the new rules. Another equipment supplier, Applied Materials, said the export restrictions will prevent it from making about $400 million in revenue in the fourth quarter.

It’s common for Western companies to broadly suspend exports in the immediate aftermath of new U.S. restrictions, then resume a little later once they’ve deciphered the rules, lawyers say. But national security experts say the new restrictions, designed to prevent China from producing advanced chips, are among the strictest the United States has put in place.

“I see these export controls as extremely drastic. It goes directly to the heart of Beijing’s efforts to create a world-class domestic semiconductor industry,” said Martijn Rasser, senior fellow at the Center for a New American Security. In particular, a new rule that prohibits “US persons” from supporting certain Chinese chipmakers “will not only freeze China’s capabilities, it will actually lead to a downgrade over time,” Rasser said.

US imposes strict rules to limit China’s access to high-tech chips

The trade restrictions could also have unintended consequences for the United States, warned Willy Shih, a Harvard Business School professor who specializes in technology and manufacturing. Depriving China of the ability to make the most advanced chips could lead it to pump out even more low-end chips, driving prices down and making it difficult for U.S. and Western factories to compete in that segment, he said. That, in turn, could make Western buyers of such chips dependent on Chinese suppliers.

“It’s a bit of a blunt instrument,” he said of export controls. “The thing to worry about is collateral damage.”

The Department of Commerce, which oversees the regulation, said it looks forward to such negative impacts. “That’s just something we’ll keep looking at and if there’s any unintended consequences, we’ll figure out what adjustments are appropriate,” a Commerce official told The Post on Monday, on condition of anonymity because the person was not authorized to speak publicly. to speak .

The official added that the rules are “not designed to break everything” when it comes to trading, but only to “give China’s ability to produce chips at a certain level”.

The export controls, announced Oct. 7, are designed to slow down China’s ability to produce high-performance semiconductors that have dual-use uses in commercial and military technology — and even some uses in weapons of mass destruction, the Biden administration said. For the time being, China is still lagging behind Taiwan, South Korea and the United States when it comes to the production of the most high-tech chips.

The controls essentially block exports to China of American-made manufacturing equipment needed to produce advanced chips. They also prohibit the export of American tools or components to Chinese factories that can make high-quality semiconductors.

In a new move that has prompted some companies to largely suspend trade with China, the rules also ban “American persons” — including American factories and Americans and American green card holders who work in foreign factories abroad — to support the development or production of advanced chips in China unless licensed by the US government.

ASML, a Dutch manufacturer of high-performance semiconductor manufacturing tools with US offices and many US employees, immediately ordered its US staff to freeze their interaction with Chinese customers.

“ASML US employees are required to – directly or indirectly – refrain from servicing, shipping or supporting customers in China until further notice, while ASML is actively assessing which specific fabs are affected by this restriction,” the company told employees in an internal letter from last week, an ASML spokesperson confirmed.

The company said the freeze would apply to US citizens, green card holders and foreigners living in the United States.

The rules make for difficult decisions for many tech workers, Rasser said.

“There are green card holders who are considered to be American individuals who are in trouble. Do they want to stay in China and give up their status as an American person or do they want to move?” he said.

Other American and Western suppliers also seem to be breaking ties with Chinese chip factories. KLA Corp. and Lam Research Corp., both California-based, have paused support for already installed equipment and temporarily halted installation of new equipment at Chinese chipmaker YMTC, The Wall Street Journal reported. The suppliers declined to comment. YMTC did not respond to a request for comment.

The new restrictions put the responsibility on equipment suppliers to determine whether their Chinese customers produce advanced chips. That’s freezing some commerce as equipment suppliers “go out of their way to find out what kind of work Chinese fabs do,” said Kevin Wolf, a former senior Commerce Department official who is now a partner at Akin Gump Strauss Hauer. & Field. “Companies that don’t want to make a mistake or break the law will pull out.”

Leave a Comment