Wednesday, March 22, 2023

Biden to Tighten Restrictions on Semiconductor Exports to China


The Biden administration is working to further tighten restrictions on exports of semiconductor manufacturing equipment to China, improving rules designed to prevent the country from developing an advanced chip industry.

The administration briefed U.S. businesses on the plan and told them it plans to announce new restrictions as early as next month, according to people familiar with the matter. The rules could double the number of machines requiring special export licenses, creating new hurdles for equipment makers such as Applied Materials Inc., said the people, who spoke on condition of anonymity because the deliberations are private.

The move will further improve chip manufacturing already facing rules imposed in October.
The restrictions require export licenses for certain machines and prevent US citizens from working in China and other countries that could pose a threat to national security. There are also regulations that restrict technical support or the sale of certain types of products.

Under the latest rules, the government plans to coordinate with the governments of the Netherlands and Japan, two major countries that manufacture chip-making facilities, according to people familiar with the matter. A person familiar with the administration’s plans said the United States has no intention of weakening its plans if other countries adopt weaker guidelines.

Representatives of the White House National Security Council and the Commerce Department, which oversee the process, declined to comment.
About 17 of the multimillion-dollar machines needed to manufacture semiconductors currently require licenses, especially if Chinese customers try to buy them. That figure would double if the restrictions imposed by Tokyo and The Hague were included, the people said.

The three major manufacturers of chip equipment in the United States: Applied Materials, KLA Corp. and Lam Research Corp. cooperate with Japanese Tokyo Electron Co., Ltd.
and ASML Holding NV in the Netherlands, which dominate the sector. Without access to their best products, it is impossible to build factories capable of manufacturing state-of-the-art chips.

Shares of these companies fell on Friday in a sell-off. Applied Materials and Lam both fell 2.3%, while KLA fell 2%.

These restrictions are to the detriment of the industry. US companies have been forced to warn investors that losing access to the Chinese market will cost them billions in lost revenue. To level the playing field — and tighten the circle around China’s burgeoning chip effort — the Biden administration is pressuring Tokyo and The Hague to impose the same restrictions on their companies.

Earlier this week, the Dutch government said it was preparing to restrict certain chip-making machines.
A new proposal would limit exports of so-called immersion DUV lithography products, adding to the restrictions already in place for the latest lithography machines. This equipment is essential for producing some of the most advanced chips in the world.

The rules are expected to be published by the summer, according to a letter from the government’s foreign trade minister to lawmakers on Wednesday. However, unlike the United States, the Dutch government has not discussed restrictions on its citizens or specific restrictions on the end use of chip machines.

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