U.S. aims to hobble China’s chip industry with sweeping new export rules

Oct 7 (Reuters) – The Biden administration on Friday released a sweeping set of export controls, including a measure to cut China off from certain semiconductor chips manufactured around the world with US tooling, putting its reach within its reach Attempt to slow Beijing’s technology greatly expanded and military advances.

The rules, some of which take effect immediately, effectively build on restrictions set out in letters earlier this year to leading toolmakers KLA Corp (KLAC.O), Lam Research Corp (LRCX.O) and Applied Materials Inc (AMAT. O) You must stop shipments of equipment to wholly Chinese-owned factories that manufacture advanced logic chips.

The series of measures could mark the biggest shift in U.S. policy toward shipping technology to China since the 1990s. If effective, they could set China’s chipmaking industry back years by forcing US and foreign companies using US technology to stop supporting some of China’s leading fabricators and chip designers.

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In a briefing with reporters Thursday unveiling the rules, senior government officials said many of the measures aimed to prevent foreign firms from selling advanced chips to China or to provide Chinese firms with tools to make their own advanced chips supply. However, they acknowledged that they have not yet received any commitments that allied nations will implement similar measures and that talks with those nations are ongoing.

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“We recognize that the unilateral controls we put in place will lose effectiveness over time if other countries don’t join us,” an official said. “And we risk damaging US technology leadership if foreign competitors are not subject to similar controls.”

The expansion of US powers to control the export of chips made with US tools to China is based on an extension of the so-called Foreign Direct Product Rule. It was previously expanded to give the US government powers to control overseas chip exports to Chinese telecom giant Huawei Technologies Co Ltd (HWT.UL) and later the flow of semiconductors to Russia following its invasion of Ukraine to stop.

On Friday, the Biden administration applied the expanded restrictions to China’s IFLYTEK, Dahua Technology and Megvii Technology, companies that were added to the company list in 2019 for allegedly helping Beijing suppress its Uyghur minority group.

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The rules, released on Friday, also block the shipping of a wide range of chips for use in Chinese supercomputing systems. The rules define a supercomputer as any system with more than 100 petaflops of processing power in a 6,400-square-foot footprint, a definition that two industry sources said could also apply to some commercial data centers owned by Chinese tech giants.

US Senate Democratic Chairman Chuck Schumer welcomed the announcement, arguing the rules would “protect our country’s innovations from China’s predatory actions.”

The Semiconductor Industry Association, which represents chipmakers, said it is studying the regulations and urged the United States to “implement the rules in a targeted manner — and in collaboration with international partners — to create a level playing field.”

Earlier Friday, the United States added China’s top memory chipmaker YMTC and 30 other Chinese companies to a list of companies that US officials cannot inspect, fueling tensions with Beijing and targeting a company the Biden administration has since long worried. Continue reading

The “unverified list” is a potential precursor to stricter economic blacklists, but companies that comply with US inspection rules can be delisted. On Friday, US officials removed nine such firms, including a unit of China’s Wuxi Biologics that makes ingredients for AstraZeneca Plc (AZN.L)’s COVID-19 vaccine.

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The new regulations will also severely restrict the export of US devices to Chinese memory chip makers, formalizing letters to Nvidia Corp (NVDA.O) and Advanced Micro Devices Inc (AMD) (AMD.O) requesting the supply of chips to China, used in the supercomputing systems that nations around the world rely on to develop nuclear weapons and other military technologies.

Reuters was the first to report key details of the new restrictions on memory chipmakers, including a respite for foreign companies doing business in China and measures to expand restrictions on KLA, Lam, Applied Materials, Nvidia and AMD technology shipments to China . read on read on

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Reporting by Stephen Nellis in San Francisco and Karen Freifeld in New York Additional reporting by David Shepardson in Washington Editing by Alexandra Alper, Chris Sanders and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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