The Biden administration is reportedly weighing new restrictions on the sale of semiconductor equipment and AI memory chips to China, intensifying the US campaign to limit Beijing’s technological advancement. This potential move, expected to be announced as early as next week, comes after extensive internal deliberations and international negotiations. However, sources familiar with the matter emphasize that the rules are not yet finalized and remain subject to change.
The proposed measures reflect a calibrated escalation in the US’s efforts to curtail China’s access to advanced technology. While earlier drafts of the restrictions considered more sweeping actions, the latest proposals represent a more targeted approach. Key adjustments include a narrowed list of Chinese companies to be sanctioned and a focus on equipment manufacturers rather than chip fabrication facilities.
At the heart of the changes is the exclusion of ChangXin Memory Technologies Inc. (CXMT), a major Chinese player attempting to develop cutting-edge AI memory chip technology. Instead, the US plans to target two chip factories owned by Semiconductor Manufacturing International Corp. (SMIC), a critical partner of Huawei Technologies Co., along with over 100 Chinese companies that produce semiconductor manufacturing equipment.
The announcement of potential restrictions sent ripples through the global semiconductor industry, with varying impacts on stakeholders:
- Japanese Chipmakers Surge: Following the news, shares of Japanese semiconductor companies rallied. Tokyo Electron Ltd. surged as much as 10%, while Kokusai Electric Corp. and Screen Holdings Co. posted significant gains of 23% and 10%, respectively.
- American Firms Lobbying for Balance: US chip equipment manufacturers, including Lam Research Corp., Applied Materials Inc., and KLA Corp., have pushed back against the idea of stringent unilateral sanctions. They argue such measures could place them at a disadvantage compared to foreign competitors like Tokyo Electron and ASML Holding NV, whose home countries have yet to fully align with US-imposed restrictions.
The selective nature of the sanctions may mitigate some of the potential harm to American firms while still advancing Washington’s goal of containing China’s technological ascent.
The Biden administration’s deliberations have involved months of negotiation with key allies, including Japan and the Netherlands. While both countries have implemented partial restrictions following the US’s 2022 export controls, they have resisted Washington’s calls for tighter measures.
A significant sticking point has been the US’s use of the Foreign Direct Product Rule (FDPR), a legal provision that extends American export controls to foreign companies using US-origin technology or software. This summer, American officials floated the idea of applying FDPR to foreign chipmakers directly, but the proposal was met with resistance from Tokyo and The Hague, which viewed it as an overreach.
Despite the pushback, the latest US rules would exempt allied companies from FDPR provisions, reflecting a softer stance aimed at preserving alliances while still advancing export control objectives.
The proposed restrictions also address high-bandwidth memory (HBM) chips, a critical component for artificial intelligence (AI) systems. HBM chips enable rapid data storage and processing, making them essential for AI-driven applications in sectors such as autonomous vehicles, healthcare, and defense.
Major players in the HBM market, including Samsung Electronics Co., SK Hynix Inc., and US-based Micron Technology Inc., could face new hurdles in their dealings with Chinese customers. This aligns with Washington’s broader strategy of limiting China’s access to foundational AI technologies.
The Biden administration faces a delicate balancing act between national security imperatives and protecting the commercial interests of American firms. The semiconductor industry, a cornerstone of the global economy, has been a focal point of US-China tensions. While the US aims to prevent China from advancing its military and technological capabilities, overly restrictive measures risk alienating allies and harming US-based businesses.
American chipmakers have warned that broad sanctions could have “catastrophic” consequences for their revenue and workforce. This has fueled internal debates within the administration over how to design effective yet minimally disruptive export controls.
China, for its part, has invested heavily in domestic semiconductor manufacturing to reduce its dependence on foreign technology. Companies like Huawei and SMIC have been central to these efforts, and additional US sanctions are likely to spur further investment in self-sufficiency.
Beijing has condemned previous US restrictions as an attempt to stifle its economic growth and maintain technological dominance. The Chinese government is expected to retaliate against the new measures, potentially through trade restrictions or regulatory actions targeting American firms operating in China.
