The US is quickly stepping up efforts to try to thwart China’s progress in the semiconductor industry – vital for everything from smartphones to weapons of war.
In October, Washington announced some of the broadest export controls yet, requiring licenses for companies that export chips containing US tools or software to China, regardless of where in the world they are made.
Washington’s measures also bar US citizens and green card holders from working for certain Chinese chip companies. Green card holders are permanent US residents who have the right to work in the country.
It cuts off an important pipeline of American talent to China, which will impact the development of high-end semiconductors.
Advanced chips are used to power supercomputers, artificial intelligence, and military hardware.
The US says China’s use of the technology poses a threat to its own national security.
Alan Estevez, undersecretary at the US Commerce Department, announced the rules and said he wants to make sure the US does everything it can to prevent “sensitive technology with military applications” from being acquired by China.
“The threat environment is ever-changing, and today we’re updating our policies to ensure we meet the challenges,” he said.
Meanwhile, China has labeled the controls “technology terrorism.”
Chip-producing countries in Asia — such as Taiwan, Singapore and South Korea — have raised concerns about how this bitter battle is affecting the global supply chain.
And there have been three significant developments in the chip conflict over the past week.
The Biden administration has added 36 more Chinese companies, including major chipmaker YMTC, to Washington’s “company list.”
That means American companies need government approval to sell certain technology to them, and that approval is difficult to obtain.
The US restrictions are having far-reaching implications. Last week, UK-based computer chip designer Arm confirmed that it does not sell its most advanced designs to Chinese firms, including tech giant Alibaba, due to US and UK controls.
Arm said it is “obligated to comply with all applicable export laws and regulations in the jurisdictions in which it operates.”
China has filed a complaint with the World Trade Organization (WTO) against the US over its export controls on semiconductors and other related technologies.
This is the first WTO case Beijing has brought against the US since President Joe Biden took office in January 2021.
In its WTO application, China alleged that the US abused export controls to “maintain its leadership in science, technology, engineering and manufacturing”.
It added that US actions threatened “the stability of global industrial supply chains”.
The US responded that the trade body was “not the appropriate forum” to address national security concerns.
Thea Kendler, US Assistant Secretary of Commerce for Export Administration, said, “US national security interests require that we act decisively to deny access to advanced technologies.”
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The complaint states that the US imposed restrictions on the export of about 2,800 Chinese goods, but only 1,800 of those were allowed under international trade rules.
The United States has 60 days to attempt to resolve the matter. If not, China may request a panel to review its case.
Earlier this month, the WTO ruled that US tariffs on steel and aluminum, imposed by the US under former President Donald Trump, violate global trade rules.
Two-thirds of all goods China sells to the US are subject to tariffs.
The US said it “strongly disagrees” with the ruling and has no intention of lifting the measures.
Japan and the Netherlands could potentially impose export controls on China – restricting the ability of Japanese and Dutch companies to sell advanced products in the Chinese market.
On Monday, White House National Security Adviser Jake Sullivan said the US had held talks with the two major chip manufacturing equipment suppliers about introducing similar US controls in Beijing.
“I will not preempt any announcement,” Mr. Sullivan told reporters. “I can only say that we are very satisfied with the openness, the substance and the intensity of the discussions.”
US controls aren’t just aimed at chipmakers. They also affect manufacturers of chip fabrication equipment.
Large companies in Japan or the Netherlands could lose a large and lucrative buyer of their high-end machines.
Peter Wennink, CEO of Dutch chip equipment maker ASML Holding NV, questioned whether the Netherlands should restrict exports to China.
Mr Wennink said that in response to US pressure, the Dutch government had already blocked ASML from selling its most advanced lithography machines to China since 2019.
“Perhaps [the US thinks] we should come across the table, but ASML has already sacrificed,” he told Dutch media.
Chipmakers are also under pressure to make more advanced chips to support new products.
For example, Apple’s new laptop will feature chips from industry leader Taiwan Semiconductor Manufacturing Company, which are 3 nanometers in size. For comparison: a human hair measures about 50,000 to 100,000 nanometers.
Analysts say US controls could put China further behind other chip-producing countries, although Beijing has openly said it wants to prioritize semiconductor manufacturing and become a superpower in the sector.
The US has already significantly isolated China’s chip industry, although recent measures are not as sweeping as those announced in October.
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