By Karen Freifeld and David Shepardson
(Reuters) – The U.S. will launch its third crackdown in three years on China’s semiconductor industry on Monday, restricting exports to 140 companies including chip equipment maker Naura Technology Group, according to two people familiar with the matter.
The efforts to thwart Beijing’s chipmaking ambitions will also hit Chinese chipmakers Piotech and SiCarrier Technology with new export restrictions as part of the package, which also targets the shipment of advanced memory chips and more chipmaking tools to China.
The move marks one of the Biden administration’s latest large-scale attempts to hinder China’s ability to access and produce chips that could help advance artificial intelligence for military applications or otherwise threaten U.S. national security.
It comes just weeks before the swearing-in of Republican former President Donald Trump, who is expected to maintain many of Biden’s tough measures against China.
The package includes restrictions on shipments to China of high-bandwidth memory (HBM) chips, which are critical for high-end applications such as AI training; new restrictions on 24 additional chip manufacturing tools and three software tools; and new export restrictions on chip-making equipment manufactured in countries such as Singapore and Malaysia.
The controls on the instruments are likely to hurt Lam Research, KLA and Applied Materials, as well as non-US companies such as Dutch equipment manufacturer ASM International.
Chinese companies facing new restrictions include nearly two dozen semiconductor companies, two investment firms and more than a hundred makers of chip-making tools, the sources said. U.S. lawmakers say some companies, including Swaysure Technology Co, Qingdao SiEn and Shenzhen Pensun Technology Co, are working with China’s Huawei Technologies, the telecommunications equipment leader that was once hobbled by U.S. sanctions and is now central to China’s advanced chipmaking and -development.
They will be added to the Entity List, which will prevent US suppliers from shipping to them without first receiving a special license. China has stepped up its drive to become self-sufficient in the semiconductor sector in recent years as the US and other countries have restricted exports of the advanced chips and the tools to make them. However, it remains years behind chip industry leaders such as Nvidia in AI chips, and chip equipment manufacturer ASML in the Netherlands.
The US is also poised to impose additional restrictions on Semiconductor Manufacturing International, China’s largest contract chip manufacturer, which was placed on the Entity List in 2020 but with a policy that allowed billions of dollars in licenses to be granted to ship goods to it.
For the first time, the US will add two companies investing in chips to the Entity List. Chinese private equity firm Wise Road Capital and technology company Wingtech Technology Co will be added.
Companies seeking licenses to ship to companies on the Entity List are typically denied.
DUTCH AND JAPANESE EXEMPTION
One aspect of the new package that addresses the Foreign Direct Products rule could hurt some U.S. allies by limiting what their companies can ship to China. The new rule will expand U.S. powers to curb exports of chip equipment by American, Japanese and Dutch manufacturers from other parts of the world to certain chip factories in China.
Equipment made in Malaysia, Singapore, Israel, Taiwan and South Korea is covered by the rule, while the Netherlands and Japan are exempt. The expanded direct foreign products rule will apply to 16 companies on the entity list seen as key to China’s most advanced chip manufacturing ambitions.
The rule will also reduce to zero the amount of U.S. content that determines when certain foreign items fall under U.S. control. That will allow the US to regulate any item shipped from abroad to China if it contains American chips.
The new rules are released after lengthy discussions with Japan and the Netherlands, which along with the US dominate the production of advanced chip-making equipment. The U.S. plans to exempt countries that implement similar controls, the people said.
Another rule in the package limits the memory used in AI chips corresponding to what is known as “HBM 2” and higher, technology made by South Korea’s Samsung and SK Hynix and America’s Micron. Industry sources only expect Samsung Electronics to be affected. The latest rules are the third major package of chip-related export restrictions for China implemented under the Biden administration. In October 2022, the US published a sweeping set of controls to curb sales and production of certain high-end chips, which were considered the biggest shift in US technology policy towards China since the 1990s.
(Reporting by Karen Freifeld and David Shepardson; additional reporting by Brenda Goh; Editing by Chris Sanders, Alexandra Alper and Sonali Paul)
