Chip Wars: U.S Announces Sweeping Restrictions On Export OF Semiconductor Chip To China, Beijing Terms Its An Act Of "Technological Hegemony"

The U.S. Commerce Department has published an expansive plan to deprive China of access to semiconductor chips made anywhere in the world using U.S. equipment in a move aimed at curtailing Beijing's technological and military advances.

The Biden administration announced that it would impose restrictions on 31 Chinese companies, research institutions and related groups effective October 21, effectively blocking their ability to obtain core U.S. technologies.

The U.S. claimed that the latest export control moves were intended to halt shipments of chips and chip-making technology of potential use to China in its military build-up and bid to dominate key industries.

The U.S. added China's top memory chipmaker YMTC and 30 other Chinese entities to a so-called "unverified" trade list. 28 companies were added to the "entity list", including several provincial arms of China's National Computer Centre, the Beijing Institute of Technology and Beijing SenseTime Technology Development, a subsidiary of a major Chinese A.I. company. These firms will now be subject to government licensing and sanctions requirements.

The new rules released by the U.S. also block shipments of a broad array of chips for use in Chinese supercomputing systems. The rules define a supercomputer as any system with more than 100 petaflops of computing power within a floor space of 595m2, a definition that two industry sources said could also hit some commercial data centres at Chinese tech giants.

The U.S. export control measures could hobble China's chip manufacturing industry by forcing the U.S. and foreign companies that use U.S. technology to cut off support for some of China's leading factories and chip designers.

In 2019, the Trump Administration banned Chinese telecommunications behemoth Huawei Technologies' access to U.S. computer chips in 2019.

In August this year, the U.S. Commerce Department barred U.S. industry leaders Nvidia and Advanced Micro Devices from selling cutting-edge artificial intelligence chips to Chinese firms. Nvidia estimates that it may lose approximately $400 million in potential sales to China in the third quarter and is said to be lobbying the U.S. government to seek exemptions.

The U.S. will invest around $52.7 billion in semiconductor chip production under the $280 billion Chips and Science Act. The measure aims to ensure the U.S. can keep pace with China as the two countries battle for dominance in the high-tech sector.

China's reaction

Commenting on the U.S. move, Mao Ning, a spokesperson for China's Foreign Ministry, said on Saturday that the U.S. new export controls would hinder international tech exchanges and economic cooperation and undermine the stability of global industrial and supply chains and the recovery of the world economy.

The spokesperson added that the U.S. politicisation and weaponisation of technology, economic and trade issues will not stop China's development but will only hurt the U.S. itself.

Out of the need to maintain its sci-tech hegemony, the U.S. abuses export control measures to maliciously block and suppress Chinese companies, Ning further added.

In a bid to build self-reliance in semiconductor manufacturing, China is pouring billions. However, it's not yet capable of producing its own high-end chips to furnish advanced computing devices. A notable success story is China's largest chipmaker, Semiconductor Manufacturing International Corp (SMIC), which reported better-than-expected revenue of $1.903 billion in the second quarter of this year, up by 3.3 per cent from the previous quarter and up 41.6 per cent year-on-year.

"We understand the goal of ensuring national security and urge the U.S. government to implement the rules in a targeted way and in collaboration with international partners to help level the playing field and mitigate unintended harm to U.S. innovation", the Semiconductor Industry Association, which represents U.S. semiconductor industry, said in a statement.