U.S. Tightens Grip on China’s Semiconductor Industry
The United States has once again escalated its efforts to curb China’s advancements in semiconductor technology. On December 2, 2024, the Biden administration unveiled its third major crackdown on China’s chip industry in three years. This move introduces stringent export controls targeting Chinese firms and aims to stymie Beijing’s ambitions in producing advanced semiconductors critical for artificial intelligence (AI) and military applications.
What Are the New Restrictions?
The latest measures impose export restrictions on 140 Chinese companies, including major semiconductor tool manufacturers like Naura Technology Group, Piotech, ACM Research, and SiCarrier Technology. These companies have been added to the U.S. Department of Commerce’s Entity List, effectively barring them from receiving U.S.-made semiconductor tools and technologies without special licenses that are nearly impossible to obtain.Key components of the new rules include:
- Prohibition of 24 types of chipmaking equipment and three software tools used for semiconductor manufacturing.
- Restrictions on high-bandwidth memory chips essential for AI training and advanced computing.
- Expansion of the Foreign Direct Product Rule, which extends U.S. jurisdiction over chipmaking equipment produced in other countries using U.S. technology. This affects exports from nations like Israel, Taiwan, Singapore, and Malaysia.
These measures also eliminate the threshold for U.S. content in foreign products destined for China, tightening control over any items containing U.S.-designed components.
Impact on Chinese Firms and Global Supply Chains
The restrictions are a significant blow to China’s semiconductor industry, which has been striving for self-sufficiency amid increasing global scrutiny. Companies such as Huawei Technologies, a key player in China’s advanced chip production, are expected to face severe disruptions. Over 20 semiconductor firms and more than 100 chipmaking tool manufacturers have been directly impacted by these measures.China’s Ministry of Commerce has condemned the move as “economic coercion” and accused the U.S. of undermining global trade norms. The Chinese government has vowed to implement countermeasures to protect its domestic industries.
Fallout for U.S. and Global Firms
While these restrictions aim to hinder China’s technological progress, they also carry repercussions for U.S. and international companies. Major American firms like Lam Research, KLA Corporation, and Applied Materials, along with Dutch company ASM International, are likely to experience reduced revenues due to their inability to sell equipment to Chinese clients.Additionally, countries such as Japan and the Netherlands—key allies in chipmaking technology—are exempt from some of these rules but remain cautious about their long-term implications on trade dynamics.
Broader Context: A Geopolitical Tech War
This latest action is part of an ongoing tech war between the U.S. and China that has intensified over recent years. The Biden administration has consistently framed these export controls as necessary for national security, citing concerns over China’s potential use of advanced chips in military modernization efforts.In response, China has doubled down on its self-sufficiency goals by investing heavily in domestic semiconductor research and development. For instance, it recently announced a $47.5 billion fund to bolster its chip industry.
The Road Ahead
As President-elect Donald Trump prepares to take office in January 2025, many expect his administration will continue Biden’s tough stance on China’s tech sector. However, questions remain about how these policies will evolve under new leadership.The global semiconductor landscape is at a critical juncture. While the U.S.’s actions aim to maintain its technological edge and safeguard national security, they also risk further fragmenting global supply chains and escalating economic tensions with China. The coming months will be crucial in determining how both nations navigate this high-stakes technological rivalry.
Sources
- Al Jazeera: “US unleashes another crackdown on China’s chip industry” (2024-12-02)
- CNN: “China hits out at latest US effort to block Beijing’s access to chip technology” (2024-12-03)
- Reuters: “Latest US strike on China’s chips hits semiconductor toolmakers” (2024-12-02)
- PBS NewsHour: “China bans exports to U.S. of key high-tech materials in response to chip sanctions” (2024-12-03)
Learn about our Tariff Classification Workshop
Classification Workshop for import, export, FTA determination & clarification on Section 301 and Section 232. Critical information is not only for duty purposes but also to determine whether goods are subject to quotas, restraints, embargoes, or other restrictions.
