US Intensifies Crackdown on China's Chip Industry

The United States has launched its third major crackdown on China's semiconductor industry in as many years, imposing new export restrictions on 140 companies and tightening controls on key technologies, reports Reuters. The Commerce Department detailed a range of measures aimed at curbing China's advancement in advanced chip manufacturing.

The new restrictions target several key areas:

Chip Equipment: New controls will be placed on semiconductor manufacturing equipment crucial for producing advanced integrated circuits. This includes tools used in etching, deposition, lithography, ion implantation, annealing, metrology, inspection, and cleaning. This could impact major US companies like Lam Research, KLA Corp, and Applied Materials, as well as international players such as Dutch equipment maker ASM International.

Software: The US is implementing new controls on software used in the development and production of advanced integrated circuits. This includes software that enhances the productivity of advanced machines or enables less-advanced machines to produce advanced chips. This measure could affect companies like Siemens, the parent company of Mentor Graphics.

High Bandwidth Memory (HBM): A new rule restricts the export of high bandwidth memory (HBM) used in AI chips, specifically targeting HBM2 and higher. This technology is produced by South Korea's Samsung and SK Hynix, and US-based Micron Technology. Industry sources suggest that only Samsung Electronics will be significantly impacted, given that it generates about 20% of its HBM chip sales from China.

Entity List Expansion: The Commerce Department has added 140 entities to its Entity List, including semiconductor fabrication plants, semiconductor tool companies, and investment firms deemed to be supporting China's advanced chip ambitions. These additions will generally result in license denials for exports to these entities. New additions include Chinese private equity firm Wise Road Capital, tech firm Wingtech Technology Co, and JAC Capital.

Foreign Direct Product Rule Expansion: The US is expanding its Foreign Direct Product Rule (FDPR) to broaden its authority to control exports of chipmaking equipment made by US, Japanese, and Dutch manufacturers, even when produced outside of those countries, to specific chip plants in China. This expanded FDPR will apply to 16 companies on the entity list deemed most critical to China's advanced chipmaking efforts. The rule will also lower the threshold of US content required to trigger US regulatory control, meaning virtually any item shipped to China from overseas containing US chips will be subject to US regulations.