Biden government restricts China’s access to chip technology

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The Biden administration on Friday announced sweeping new limits on the sale of semiconductor technology to China, a move intended to undermine Beijing’s ability to access critical technologies that are needed for everything from supercomputing to weapons guidance.

The moves are the clearest sign yet that a dangerous standoff between the world’s two biggest superpowers is growing stronger in the technological sphere, with the United States trying to establish dominance over advanced computing and semiconductor technology that are essential to China’s military and economic ambitions.

The package of restrictions, which was released by the Commerce Department, is designed largely to slow the progress of Chinese military programs, which use supercomputing to model nuclear explosions, direct hypersonic weapons and establish advanced networks to keep an eye on dissidents and minorities, among others. activities.

Alan Estevez, Under Secretary of Commerce for Industry and Security, said his office is working to prevent sensitive technologies with military applications from being acquired by China’s military, intelligence and security services.

“The threat environment is always changing, and we are updating our policies today to ensure that we are meeting the challenges presented by the PRC as we continue our contact and coordination with allies and partners,” he said, referring to the People’s Republic of China.

American companies will no longer be able to supply advanced computing microchips, chip-making equipment and other products to China unless they receive a special license. Most of these permits will be denied, although certain shipments to facilities operated by US companies or allied countries will be evaluated on a case-by-case basis, a senior government official said Thursday.

The restrictions limit US exports of high-end chips, called graphics processing units, used to power artificial intelligence applications, and place broad limits on chips destined for Chinese supercomputers. The rules also prohibit US-based companies that make the equipment used to make advanced logic and memory chips from selling those machines to China without a license.

Perhaps most significantly, the Biden administration has also imposed sweeping international restrictions that will prohibit companies anywhere in the world from selling chips used in artificial intelligence and supercomputing in China if they are made with American technology, software or machinery. The restrictions use what is known as the foreign direct product rule, which was recently applied by President Donald Trump to harm Huawei.

Another foreign direct product rule prohibits a wider range of products made outside the United States using US technology from being shipped to 28 Chinese companies placed on an “entity list” for national security concerns.

These companies include Beijing Sensetime Technology Development, a unit of large Chinese artificial intelligence company SenseTime. Also included are Dahua Technology, Higon, IFLYTEK, Megvii Technology, Sugon, Tianjian Phytium Information Technology, Sunway Microelectronics and Yitu Technologies, as well as a variety of laboratories and research institutions linked to Chinese universities and the government.

The rules also restrict US citizens from helping to develop China’s semiconductor industry to advanced levels. The previous Friday (30), the US government announced that it was adding another 31 Chinese companies and institutions to an “unverified list” that limits their ability to source a smaller set of certain regulated items from the US. Among them is Yangtze Memory Technologies, a major maker of memory chips from which Apple is considering acquiring some products.

It remains to be seen whether the Chinese government will take action in response. Samm Sacks, a senior fellow at Yale Law School who studies technology policy in China, said the new rules could lead Beijing to impose restrictions on US companies or companies from other countries that comply with US rules but still want to maintain operations in the US. China.

“The question is, would this new package cross a red line to trigger a response that we haven’t seen before?” she said. “A lot of people are waiting for that to happen. I think we’ll have to wait and see.”

The measures come at an especially delicate time for Beijing. Chinese leaders will hold a major political meeting starting on October 16, at which President Xi Jinping is expected to secure a third term, becoming the country’s longest-serving leader since Mao Tsetung.

Liu Pengyu, a spokesman for the Chinese Embassy in Washington, said the United States was trying to “use its technological prowess as an advantage to hinder and suppress the development of emerging markets and developing countries.”

“The US likely expects China and the rest of the developing world to forever remain at the lower end of the industrial chain,” he added.

The Chinese government has invested heavily in building its semiconductor industry, but it still lags behind the United States, Taiwan and South Korea in the ability to produce more advanced chips. In other fields, such as artificial intelligence, China is no longer significantly behind the United States, but these technologies rely primarily on advanced chips designed or manufactured by non-Chinese companies.

New limits on chip manufacturing equipment sales are also expected to clamp down on the operations of Chinese chipmakers including Semiconductor Manufacturing International, Yangtze Memory Technologies and ChangXin Memory Technologies.

The effect of restrictions will depend on how the policy is implemented. For most measures, the Commerce Department has the power to grant companies special licenses to continue selling products restricted to China, although it said most would be denied.

Some Republican lawmakers and hawks have criticized the department for being too willing to issue such licenses, allowing US companies to continue selling sensitive technology to China even when national security may be at stake.

Republican Representative Michael McCaul of Texas said he intended to use his authority as a current member of the House Foreign Affairs Committee to pressure the Department of Industry and Security, which reviews such licenses, on requests and decisions.

“If Congress feels that the department is undermining the spirit of these rules with lax licensing standards, we will assess whether the Commerce Department is the right home for this national security agency,” McCaul said.

With its vast ecosystem of factories, China remains a huge and profitable market for US chip exports. Microtechnologies are crucial for smartphones, laptops, coffee makers, cars and other goods that Chinese factories produce for domestic consumption and export around the world.

Several US companies have long argued that their sales to China are an important source of revenue, allowing them to reinvest in research and development and maintain a competitive advantage.

But doing business with China has become much more complicated in recent years, as tensions between the United States and China have escalated into cold war competition. The Chinese government has sought to smooth the divide between its defense sector and private industry, turning to Chinese companies specializing in areas such as artificial intelligence, “big data”, aerospace technologies and quantum computing to promote the country’s military modernization.

Chinese military exercises aimed at intimidating Taiwan and China’s alignment with Moscow after Russia’s invasion of Ukraine helped to extinguish any goodwill toward China in Washington and strengthened the case for technology regulation.

Still, industry executives and some analysts argue that isolating China from foreign chips will accelerate Beijing’s effort to develop them and cause US companies to lose out to foreign competitors unless other countries also impose similar restrictions.

The US Semiconductor Industry Association said on Friday it was evaluating the impact of export controls on the industry and working with companies to ensure compliance.

Translated by Luiz Roberto M. Gonçalves

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