US to Pass Stricter Regulations on Semiconductors Shipments to China

UTC by Ibukun Ogundare · 3 min read
US to Pass Stricter Regulations on Semiconductors Shipments to China
Photo: President Joe Biden / Facebook

The new regulations will support the previous rules that were passed earlier this year.

US president Joe Biden plans to announce a stricter restriction on semiconductors and chipmaking tool shipments to China. According to reliable sources, the Biden administration is looking to announce the broader limitations next month. The curb will involve the shipments of semiconductors used for AI and chipmaking utensils.

Before now, the Commerce Department had asked three US companies to stop sending semiconductors and chipmaking equipment to China. The Department communicated the restrictions in letters to KLA Corporation (NASDAQ: KLAC), Lam Research Corp (NASDAQ: LRCX), and Applied Material Inc., and manufacturing company Applied Material Inc. Additionally, the US tried to persuade its allies to also make similar policies on semiconductors exportation to China. A former Trump administration trade official, Clete Willems, stated that colliding with allies is integral to maximizing effectiveness and minimizing unintended consequences.

The US used to lead the world in semiconductor manufacturing. The nation was responsible for producing 37% of the global semiconductor chips. The country has lost its edge to now produce 12% of semiconductors worldwide. Last week, the Biden administration unveiled the plan to boost domestic chip production in the US. To support the initiative, the administration will use the $50 billion in funding from CHIPS and Science Act passed this summer. The Commerce Department announced that about $28 billion would establish domestic production of leading-edge logic and memory chips.

US to Broaden Limitations on Semiconductors and Chip Making Tools Shipments to China

The new regulations will support the previous rules that were passed earlier this year. The rules forbade the companies from sending chipmaking equipment out of the US to any factory in China. According to the three companies, they cannot export their tools to Chinese manufacturers producing advanced semiconductors with sub-14 nanometer processes. However, the Chinese factories will have access to the equipment if they obtain licenses from the Commerce Department.

People familiar with the matter told Reuters that the new rule could include more actions against China. Also, they said the actions could mean some changes, and the rules may come later than expected. A senior official at the Commerce Department noted that the move looks to “codify any restrictions that are in misinformed letters with a regulatory change.” Meanwhile, a spokesperson stated that the purpose of the new rules is “taking a comprehensive approach to implement additional actions… to protect US national security and foreign policy interests. The source mentioned that the US is preventing China from using its technology applicable to military modernization.

The US decision to place tighter restrictions on semiconductors shipment from the US to China came as Biden’s administration sought to take proper measures on its technologies.

“The strategy is to choke off China and they have discovered that Chips are a choke point. They can’t make this stuff, they can’t make the manufacturing equipment. That will change.”

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Ibukun Ogundare

Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.

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