The Biden administration is preparing to introduce a regulation aimed at restricting the export of semiconductor manufacturing equipment to China from foreign nations. According to Reuters, the initiative, as reported by two sources with knowledge of the matter, seeks to expand American oversight of the global semiconductor supply chain.
Exemptions for Key Allies
The regulation will impose stringent controls on exports to China but will exclude shipments from significant allies such as Japan, the Netherlands, and South Korea. These exemptions aim to mitigate the impact on major chip equipment manufacturers based in these countries, including ASML and Tokyo Electron.
Following this announcement, shares in Tokyo Electron rose by 7%. Other Japanese companies involved in chip-related equipment also saw positive movement, with Screen Holdings increasing by 9% and Advantest up by 4.5%.
Scope of the Rule
The new regulation extends the Foreign Direct Product rule, which permits the U.S. to control products made using American technology, even if manufactured abroad. This rule has previously been applied to restrict exports to Huawei. The current extension aims to prevent about six Chinese semiconductor fabrication plants (fabs) from receiving exports from numerous countries, potentially affecting Israel, Taiwan, Singapore, and Malaysia.
The U.S. Commerce Department, responsible for overseeing export controls, refrained from commenting on the specifics of the new rule. The broader strategy behind these measures is to restrict China’s access to advanced semiconductor technologies, thus limiting its progress in supercomputing and artificial intelligence that could enhance military capabilities.
Diplomatic Considerations
The draft rule also seeks to maintain diplomatic relations by exempting over 30 countries that are part of the same A:5 group, including Japan, the Netherlands, and South Korea. These exemptions underscore the importance of international cooperation in achieving national security goals. “Effective export controls rely on multilateral buy-in,” a U.S. official said anonymously.
Another component of the new export control package will lower the threshold of U.S. content that determines when foreign items come under U.S. control. This measure aims to close existing gaps in the Foreign Direct Product rule, ensuring equipment with U.S. technology is subject to export controls.
Implementation Timeline
Though the rule is currently in draft form and could still be modified, the target is to publish it in some form next month. This timeline highlights the urgency with which the U.S. is acting to counter China’s advancements in semiconductor technology.
This new regulation is part of a broader effort to limit China’s access to advanced semiconductor technologies. By imposing these controls, the U.S. aims to maintain its technological superiority while balancing diplomatic relations with key allies.
According to TechInsights, China plans to increase semiconductor production capacity by 40% over the next five years. The growth is being driven by increased investment in semiconductor fabrication facilities. If successful, the growth has potential implications for the global semiconductor market, including the possibility of increased competition and trade tensions.
Last Updated on November 7, 2024 3:27 pm CET
