The US government has announced new limits to contain China’s technological ambitions, particularly in the semiconductor and artificial intelligence sectors. The new curbs restrict China’s access to high-bandwidth memory, or HBM, chips in AI applications. Chips that store data are the lifeblood of technologies spanning everything from military systems to artificial intelligence. The new curbs have affected South Korea-based SK Hynix and Samsung, as well as Idaho-based Micron Technology.
The US has also reached out to extend controls to cover the export of semiconductor manufacturing equipment. The new rules cover products made by US companies in foreign facilities, but key allies like Japan and the Netherlands have been carved out. The carveout comes after hard negotiations with the two countries, which agreed not to implement the same restrictions on their semiconductor industries.
On the news, US semiconductor equipment company stocks- Lam Research, Applied Materials, and KLA Corp rose. Dutch group ASML, the semiconductor sector’s key player, minimized the impact of any such restrictions on its near-term operations while voicing its concerns for a not-so-bright long-term outlook beyond 2025.
These new restrictions are part of the Biden administration’s ongoing effort to limit China’s ability to develop advanced semiconductor and AI technologies, which could be used for military applications. In response, China criticized the measures, accusing the US of economic coercion and asserting that the sanctions would disrupt global supply chains. Beijing has vowed to take necessary actions to protect its interests.
The new sanctions add 140 Chinese firms to the US Entity List, including those producing crucial equipment for making chips. Prominent blacklisting includes those like Dongfang Jingyuan accused of theft of trade secrets from ASML. Yet, previous proposals to blacklist Shenzhen Pengjin High-Tech and ChangXin Memory Technologies were shelved – indicating a degree of flexibility in the US approach.
The controls also extend the Foreign Direct Product Rule – FDPR-to semiconductor equipment made abroad, making it impossible even for non-US manufacturers using US technology to work around the restrictions. Exemptions have been carved out for the packaging of HBM chips in China, with safeguards to prevent technology leakage to Chinese companies.
