The United States is accelerating its efforts to impede China’s advancement in the semiconductor industry, which is essential for everything from cellphones to armaments.
In October, Washington issued the most expansive export curbs to date, mandating licenses for companies shipping chips to China using US-made tools or software, regardless of where the chips were manufactured.
In addition, Washington’s regulations prohibit US nationals and green card holders from working for some Chinese chip manufacturers. Green card holders are permanent residents of the United States who are authorized to work in the nation.
It is severing a crucial conduit of American talent to China, which will hurt the development of high-end semiconductors.
Why is the United States doing this?
Powering supercomputers, artificial intelligence, and military hardware are advanced chips.
The United States asserts that China’s deployment of the technology threatens its national security.
Alan Estevez, the undersecretary of the United States Department of Commerce, issued the restrictions to ensure that the United States did all possible to prevent China from acquiring “critical technologies with military implications.”
“The threat landscape is constantly evolving, and we are currently revising our policies to ensure we can meet the challenges,” he said.
China, however, has referred to the controls as “technology terrorism.”
Chip-producing nations in Asia, such as Taiwan, Singapore, and South Korea, are concerned about the impact of this severe conflict on the global supply chain.
And in the past week, there were three key developments in the chip war.
More Chinese companies are on the ‘entity list’
The Biden administration has added 36 additional Chinese businesses to Washington’s “entity list,” including the large chipmaker YMTC.
It implies that American corporations will require government approval to sell them specific technologies, which is tough to obtain.
The US prohibitions have far-reaching consequences. Arm, a UK-based computer chip designer, said last week that it will not sell its most advanced designs to Chinese companies, including Alibaba, due to US and UK restrictions.
Arm stated that it was “dedicated to complying with all export laws and regulations in all locations in which it operates.”
China complains to the WTO
China has launched a complaint with the World Trade Organization (WTO) against the United States regarding its export restrictions on semiconductors and other related technologies.
This is the first WTO dispute initiated against the United States by Beijing since President Joe Biden assumed office in January 2021.
China charged in its WTO application that the United States is misusing export controls to maintain “its leadership in research, technology, engineering, and manufacturing areas.”
It stated that US measures posed a threat to “global industrial supply chains.”
The United States said that the trade group was “not the appropriate place” to address national security concerns.
Thea Kendler, assistant secretary of commerce for export administration, stated, “US national security interests require us to block access to advanced technologies.”
The case alleges that the United States has imposed export restrictions on around 2,800 Chinese items, of which only 1,800 were permitted under international trade regulations.
The United States has sixty days to attempt a resolution. China will be permitted to request a panel evaluate its case if this is not the case.
The WTO concluded earlier this month that US tariffs on steel and aluminum imposed by former President Donald Trump breached international trade regulations.
Two-thirds of all Chinese exports to the United States are subject to tariffs.
The United States stated that it “strongly rejects” the verdict and has no plans to remove the restrictions.
Discussions with Japan and the Dutch
Japan and the Netherlands may impose export restrictions on China, so limiting the capacity of Japanese and Dutch firms to offer advanced products on the Chinese market.
Jake Sullivan, the national security advisor for the White House, stated on Monday that the U.S. has negotiations with the two largest suppliers of chip-making equipment about adopting comparable US rules for Beijing.
Mr. Sullivan stated to reporters, “I will not preempt any announcements.” “We are impressed with the candor, content, and intensity of the discussions,” I will conclude.
The U.S. regulations are not limited to chipmakers. They also influence chip-making equipment manufacturers.
Huge corporations in Japan or the Netherlands may lose a large and valuable customer for their high-end devices.
Peter Wennink, the CEO of ASML Holding NV, a Dutch chip equipment manufacturer, questioned whether the Netherlands should restrict exports to China.
Mr. Wennink stated that, in response to US pressure, the Dutch government had prevented ASML from selling its most sophisticated lithography tools to China since 2019.
“Perhaps [the United States] believes we should cross the table, but ASML has already made sacrifices,” he told Dutch media.
What is to come
To enable new goods, chipmakers are also under pressure to provide more complex chips.
For example, the next Apple laptop will have 3-nanometer chips from Taiwan Semiconductor Manufacturing Company, an industry leader. In comparison, human hair measures approximately 50,000 to 100,000 nanometers.
Analysts assert that US limitations could place China further behind other chip-producing nations, despite Beijing’s stated desire to prioritize semiconductor manufacturing and become a sector giant.
Even if the latest penalties are not as wide as those imposed in October, the US has already considerably isolated China’s chip industry.
