By Karen Freifeld and David Shepardson
(Reuters) – The U.S. will launch its third action in three years against China’s semiconductor industry on Monday, curbing exports to 140 companies, including chip equipment maker Naura Technology Group, among other moves, two people familiar with the matter said.
Efforts to curb Beijing’s chipmaking ambitions will also hit Chinese chip toolmakers Piotech and SiCarrier Technology with new export restrictions as part of the package, which also targets shipments of advanced memory chips and more chipmaking tools to China.
The move is one of the latest major efforts by the Biden administration to prevent China’s ability to access and manufacture chips that can help advance artificial intelligence for military applications or otherwise threaten US national security.
It comes just weeks before the inauguration of Republican former President Donald Trump, who is expected to retain many of Biden’s tough measures against China.
The package includes restrictions on shipments of high-bandwidth memory (HBM) chips destined for China, critical for high-end applications such as AI training; new limits for 24 additional chipmaking tools and three software tools; and new restrictions on the export of chip-making equipment made in countries such as Singapore and Malaysia.
Tool controls are likely to hurt Lam Research ( NASDAQ: ) , KLA and Applied Materials ( NASDAQ: ) , as well as non-U.S. companies like Dutch equipment maker ASM International ( AS: ) .
Among the Chinese companies facing the new restrictions are nearly two dozen semiconductor companies, two investment firms and more than 100 makers of chip-making tools, the sources said. US lawmakers say some of the companies, including Swaysure Technology Co, Qingdao SiEn and Shenzhen Pensun Technology Co, work with China’s Huawei Technologies, a leading telecommunications equipment maker that was once hamstrung by US sanctions and is now at the center of China’s advanced chip manufacturing and development .
They will be added to the list of entities, which prohibits US suppliers from supplying goods to them without first obtaining special permission.
Asked about the US restrictions, Chinese Foreign Ministry spokesman Lin Jian said such behavior undermines the international economic trade order and disrupts global supply chains.
China will take measures to protect the rights and interests of its companies, he added at a regular press briefing on Monday.
China’s Commerce Ministry did not immediately respond to a request for comment. China has stepped up its push to become self-sufficient in the semiconductor sector in recent years, as the US and other countries have restricted exports of advanced chips and the tools to make them. However, it has been years behind chip industry leaders such as Nvidia ( NASDAQ: ) in AI chips and chip equipment maker ASML ( AS: ) of the Netherlands.
The US is also poised to place additional restrictions on Semiconductor Manufacturing International, China’s largest contract chip maker, which was placed on the 2020 Entity List but with a policy that allowed billions of dollars worth of licenses to ship goods to it.
For the first time, the US will add two companies investing in chips to the list of entities. Chinese private equity firm Wise (LON:) Road Capital and technology company Wingtech Technology Co. will be added.
Companies applying for licenses to supply to companies on the Entity List are generally rejected.
DUTCH AND JAPANESE EXCEPTED
The aspect of the new package that deals with the foreign direct products rule could hurt some US allies by limiting what their companies can ship to China.
The new rule will expand U.S. authority to restrict exports of chip-making equipment from U.S., Japanese and Dutch manufacturers made elsewhere in the world to certain chip factories in China.
Equipment manufactured in Israel, Malaysia, Singapore, South Korea and Taiwan are subject to the rule, while Japan and the Netherlands will be exempt. The expanded foreign direct product rule will apply to 16 companies on a list of entities deemed most important to China’s most advanced chipmaking ambitions.
The rule will also reduce to zero the amount of US content that determines when certain foreign items are under US control. This will allow the US to regulate any items sent to China from abroad if they contain any US chips.
The new rules come after lengthy discussions with Japan and the Netherlands, which along with the United States dominate the production of advanced chip-making equipment. The United States plans to exempt countries that introduce similar controls, the people said.
Another rule in the package limits the memory used in AI chips that match what’s known as “HBM 2” and above, technology made by South Korea’s Samsung and SK Hynix and America’s Micron ( NASDAQ: ).
Industry sources expect only Samsung Electronics (KS: ) to be affected. Analysts estimate that Samsung makes about 30% of its sales of HBM chips from China. The latest rules are the third major package of chip-related export restrictions on China enacted under the Biden administration.
In October 2022, the United States announced a comprehensive set of controls on the sale and production of certain high-end chips in what was seen as the biggest shift in its technology policy toward China since the 1990s.
