The competition for global technological supremacy is heating up, as the United States prepares to roll out new restrictions on semiconductor exports to China. These potential measures, according to reports, could be announced as early as next week and represent yet another significant moment in the continuing trade and technological tensions between the two nations.
Sources familiar with the matter have indicated the Biden administration is exploring new curbs on the sale of semiconductor equipment and AI memory chips to China. While these restrictions are expected to deepen US efforts to suppress Beijing’s technological ambitions, they appear to stop short of some of the more severe measures considered earlier. Officials have been discussing the details extensively over recent months, engaging allies like Japan and the Netherlands, and listening to the concerns of American chip-making firms about the potential financial fallout of overly harsh restrictions.
The report highlights significant changes from earlier drafts of the proposed rules. For starters, the number of Chinese companies to be added to the trade restriction list has been altered. Previously, the US had contemplated sanctioning six suppliers to Huawei Technologies, the Chinese telecommunications giant. Now, the administration is reportedly inclined to include only some of the identified Huawei suppliers, with at least one major player—ChangXin Memory Technologies—being left unscathed, creating ripples of uncertainty within the semiconductor sector.
The reluctance to include ChangXin, which aims to develop advanced AI memory chip technology, could reflect the complex balancing act the US is performing. Commerce Department spokespeople have declined to comment on the specifics of the pending rule changes, but the National Security Council has redirected inquiries to its Bureau of Industry and Security.
This latest round of export controls doesn't just impact suppliers; it has reverberated throughout the semiconductor market. Reports indicate chip stocks across Asia and Europe saw significant gains following rumors of the new restrictions. For example, the Dutch semiconductor equipment company ASML Holding NV’s shares surged 5.5%, leading the rally among chip gear firms, including BE Semiconductor Industries NV and Aixtron SE. Japanese companies also followed suit, with Tokyo Electron Ltd. climbing by 7% and Screen Holdings Co. gaining 6%.
Industry analysts have observed this dynamic as potentially beneficial for American chip equipment manufacturers like Lam Research Corp., Applied Materials Inc., and KLA Corp., who have long argued against unilateral restrictions on certain significant players within China. Their contention has been bolstered by fears of being placed at a competitive disadvantage against foreign rivals not facing similar constraints. A shared concern among industry players has been the potential catastrophic effects of more aggressive restrictions.
Reflecting this sentiment, Leping Huang, chief technology analyst at Huatai Securities, noted this latest incarnation of strategies appears “better than the worst case the market had worried about,” offering some much-needed optimism within the sector.
The planned restrictions would also target factories operated by Semiconductor Manufacturing International Corp. (SMIC), which works closely with Huawei. More than 100 additional entities could be listed as well, focusing this time on Chinese firms producing semiconductor manufacturing equipment rather than those directly fabricated the chips themselves, marking another strategic pivot for US regulators.
Significantly, the relationship with international allies plays another pivotal role. The Japanese and Dutch governments have shown hesitance toward aligning fully with the US strategy, fearing it places undue pressure on their own industry. While both countries have previously coordinated with the US on certain measures aimed at curbing China’s access to advanced technologies, they have resisted additional requests to implement tighter controls, especially after the summer’s aggressive negotiation tactics by US officials. The Biden administration had raised the possibility of directly curbing sales from foreign companies to China if allies didn’t cooperate, which some viewed as excessive ultimatum.
It remains to be seen how Japan and the Netherlands will act following the US's announcement. There has been discussion around potentially exempting these allies from the planned foreign direct product rule to ease cooperation. Nonetheless, major firms like Samsung Electronics Co., SK Hynix Inc., and Micron Technology Inc. are bracing for impacts from the limited provisions around high-bandwidth memory chips, integral for data-intensive applications like artificial intelligence.
The intricacies of these potential measures convey the complex interplay of technological, economic, and security concerns at play within this global showdown. The semiconductor industry has become the battleground where the world's superpowers grapple for control over the future of technology and innovation. With every turn, businesses, regulators, and governments are reminded of the vast stakes involved and the unpredictable nature of global trade relations.
