New U.S. chip rules: Biden’s “most aggressive” move on China to date

Sweeping new U.S. restrictions on technology exports to China have escalated the tech rivalry between the two superpowers to new heights, in a move that has gouged a painful chunk out of the value of stocks of top Chinese chipmakers.

On Friday, the U.S. Commerce Department announced a raft of measures that limit both the sale of semiconductors and the equipment to make semiconductors to Chinese customers, in a bid to curb Chinese companies from using them to develop or obtain cutting-edge technologies. It also added 31 companies, including Chinese memory chipmaker YMTC, to its “unverified” list of companies, potentially opening them up to be included on the separate “entity” blacklist that would bar U.S. companies from supplying them with technology.

• The export controls prohibit American citizens or companies from working with Chinese companies involved in advanced chipmaking without explicit approval: Only vendors that are granted an export license, which will be difficult to obtain, will be able to circumvent the new export controls.
• But in an effort to reduce supply chain disruptions, the administration will carve out an exception for chipmaking facilities in China owned by companies from the U.S. or allied countries that are exporting chips.

“Out of the need to maintain its sci-tech hegemony, the U.S. abuses export control measures to maliciously block and suppress Chinese companies,” Foreign Ministry spokesperson Máo Níng 毛宁 said in response (in English, Chinese). “It will not only damage the legitimate rights and interests of Chinese companies, but also affect American companies’ interests.”

• Chinese state tabloid Global Times also published a scathing critique of the move, stating that the move again proves how the U.S. “​​blatantly tramples on the principles and rules of free trade.”

The U.S. move builds upon the “foreign direct product rule” initially tested out on Chinese technology company Huawei during the Trump administration (and later used against Russia after its invasion of Ukraine), which expanded the scope of U.S. export controls to bar even foreign-produced items to U.S. regulatory control if their supply chain contains American technology.

• Some have called it the “most aggressive” move by the Biden administration on China to date: “This will set the Chinese back years,” said Jim Lewis, a technology and cybersecurity expert at the Washington, D.C.–based Center for Strategic and International Studies (CSIS), who said the policies are reminiscent of the rules imposed at the height of the Cold War.
• “The U.S. has essentially declared war on China’s ability to advance the country’s use of high-performance computing for economic and security gains,” said Paul Triolo, senior VP for China and tech policy lead at Albright Stonebridge, who wrote about the new rules for The China Project before the announcement last week.
• However, the U.S. has reportedly not received any commitment from allies to follow in similar footsteps and discussions are still ongoing, which may pose a risk to how effective the move will be in the long term.

Meanwhile, shares in semiconductor companies around the globe tanked, while top Chinese chipmakers shaved about $8.6 billion in market value today.