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June 1, 2023updated 16 Aug 2023 9:52am

US ramps up China semiconductor restrictions

The US has been trying to restrict development of high-tech equipment in China over fears it could lead to military use of US technology.

By Ryan Morrison

The US government is looking to further restrict the development of advanced technology in China including semiconductors, AI and quantum computing. The Biden administration is said to be working up new rules that would restrict the flow of investment and knowledge into Chinese companies.

US China semiconductor restrictions
The US has been ramping up restrictions on Chinese technology since 2021 (Photo by William Potter/Shutterstock)

Speaking during a Senate banking committee hearing, treasury official Paul Rosen said the investment curbing measures would include the transfer of “know-how and expertise” being restricted. This is specifically related to companies working on AI, advanced semiconductors and quantum computing.

“We continue to contribute to interagency discussions regarding policies to restrict certain US outbound investments in specific sensitive technologies with significant national security implications,” he said. Rosen hasn’t said when they might be introduced but it would apply to any technology that could pose a threat to US national security.

US companies have billions invested in China, particularly those operating in sensitive sectors. This has been heavily criticised by some in the US government, claiming it could help advance the Chinese military at a time when tensions globally are running high.

The prospect of investment restrictions was first reported in February. The Biden administration is said to be considering a range of measures that could include an outright ban on investment in companies tied to chip production.

In a statement made to Reuters at the time of the first reported investment ban, a Chinese government spokesperson said: “No restriction or repression can stop the pace of China’s scientific and technological development.” The spokesperson added: “The US politicians’ unwarranted restrictions on normal trade and economic cooperation between China and the US will only [lead to missed] development opportunities.”

The US may struggle to convince the EU of the need for restrictions on investment in China. At a meeting in Brussels last week EU trade ministers expressed concerns over the moves over supply chain concerns. “It is really important to understand how the supply chains and value chains really work,” Ville Skinnari, Finland’s trade minister told Bloomberg at the time.

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The European Commission is exploring ways to screen outward investment as part of an economic security strategy. This is due to be published later this month and was triggered by China’s support of Russia since the invasion of Ukraine.

EU commissioner for technology, Margrethe Vestager also raised concerns that unless the EU builds its own geopolitical risk framework, it runs the risk of allowing China or the US to set terms of the discussion. “If we do not assess the risks from a European perspective, then the dividing lines will be drawn either in Beijing or Washington,” she declared.

Ongoing sanctions

US sanctions relating to the chip industry have been ramping up since 2021, with Washington putting export controls on advanced semiconductors, as well as chipmaking equipment, in a bid to ensure China cannot gain an advantage in emerging technologies. Last year officials denied or took no action on a quarter of requests to stop sales from the US that it felt would “advance Beijing’s militarisation.”

China responded with a $143bn semiconductor strategy to focus on advanced manufacturing and the creation of domestic semiconductor equipment and homegrown foundries that can produce the most advanced chips.

The US has also pushed other countries to restrict the sale of high-tech equipment to China. Dutch business ASML is the only company in the world capable of making the extreme ultraviolet (EUV) photolithography machines used in the manufacturing of semiconductors. As such, it supplies all the biggest names in the industry, from TSMC to Samsung to Intel.

Earlier this year the Dutch government confirmed it would impose export controls on this type of equipment to China following increased pressure from the US. With Japan also signing on, it means the only three countries home to manufacturers of microchip printers have put blocks on exports to China.

Soon after Japan also launched its own restrictions on the sale of semiconductor manufacturing equipment.

Read more: How to sell a chip to China

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