Trump Likely to Explore Expanding Export Controls Over Chip Tools, Analysts Say

Some Republicans, and at least one former Bureau of Industry and Security official, have called on the U.S. to go beyond its current controls on advanced chips (see 2310170055) to stop China from buying a broader range of older, mature-node semiconductors (see 2311090015). But analysts said broader controls on mature chips likely would only hurt American exporters.

Chris Miller, a nonresident senior fellow with the American Enterprise Institute, said he doesn’t think the Trump administration is “likely to go down that route” because China has proven it's already able to make at least small amounts of more advanced 7-nanometer chips (see 2208190048) and “sufficient volumes of anything above 7 nanometer that it requires.” He said he doesn’t think “controlling the sale of legacy-node chips into China itself is going to be a practically enforceable policy.”

Martin Chorzempa, a senior fellow with the Peterson Institute for International Economics, made similar points, saying expanded controls could “lead to the de-Americanization of supply chains,” especially if Chinese companies are able to fill the potential void left by U.S. chip suppliers. “It would not be very effective,” he said.

But both Miller and Chorzempa said the Trump administration may consider new controls on a broader set of semiconductor manufacturing equipment, especially because many of the tools used to make less advanced chips are produced by firms in the U.S., Japan or the Netherlands.

“I think that will be a debate that does pick up, is whether expanded controls on tools make sense," Miller said.

Although the Biden administration has spent months convincing the Netherlands and Japan to increase tooling restrictions -- with some success (see 2407170040 and 2310270044) -- Miller and Chorzemopa said a Trump administration could be more assertive.

Chorzempa said he sees Trump as “much more willing to incur diplomatic costs” than Biden, so he may force Dutch and Japanese chip tooling companies to curb certain sales by “significantly expanding” U.S. foreign direct product rule restrictions, which could capture a broader range of foreign tools that are made with certain U.S.-origin content.

“I think the perception among many Republicans is that all this talk of coordinated allies -- yes, it's very important and all that,” Chorzempa said, “but often they're just foot dragging, and sometimes we just need to force them to go along.” He added that the Dutch and Japanese could face a “very tricky” scenario because the Trump administration “is likely to take a much harder line" than the Biden administration.

The Bureau of Industry and Security was reportedly expected to issue expanded chip equipment controls in August, but didn't (see 2407310016).

Miller also said the Trump administration may be more willing than the Biden administration to impose unilateral tooling controls, and the Trump administration “will have more credibility when it does threaten to go alone as a means of pulling allies along."

He also noted that the Netherlands and Japan will have a range of other issues they’ll want to discuss with the new U.S. administration, including other trade topics. “And so I think, in that context, they're probably going to be more likely to go along with tighter export control enforcement and tighter export control regulations,” Miller said, “because there will be a broader set of issues that they're going to be negotiating with the U.S.”

It’s unclear how Trump will approach working with allies on other export control issues. The Biden administration has collaborated with trading partners on a range of sanctions and export measures, particularly around Russia, including an effort with members of the multilateral Wassenaar Arrangement to impose controls on emerging technologies outside the forum (see 2409050028)). Countries have struggled to push through controls at Wassennar because Russia remains a member and can veto proposals (see 2410030050).

Chorzempa said there’s “so much uncertainty” around which of Biden's export control efforts will be continued or prioritized under Trump, adding that much of that may depend on political appointees. But he also said he doesn’t see a reason why a Trump-led Commerce Department wouldn’t want to continue coordinating with allies on tech controls outside Wassenaar.

“They will want to multilateralize controls for sure, full-stop,” Chorzempa said. “The question is, do they use some of these blunt instruments more” to convince allies to come along?

Miller also said much will depend on who Trump nominates as commerce secretary and who fills other roles in the agency.

“I think in the past, commerce secretaries have often prioritized market access and U.S. exports, and export controls have been a secondary focus,” he said. “I'll be interested to see whether that's the same dynamic under whoever the next secretary is.”

Miller also said U.S. companies should expect Beijing to retaliate if Trump follows through with his promise of hiked tariffs. That retaliation could include new export controls over more critical minerals, he said, pointing to Beijing's restrictions last year on shipments of gallium and germanium, which are used to make semiconductors (see 2307050018, 2310030035 and 2408090012).

China also could take action under its recently released dual-use export control regulations, Chorzempa said, which take effect Dec. 1 (see 2410210042). He noted that the regulations include a Chinese equivalent of the U.S. foreign direct product rule, which could subject foreign firms to Chinese export licensing requirements if those firms deal in certain goods and technologies made in China or with Chinese-origin technology.

“They could throw an enormous quantity of monkey wrenches in U.S. supply chains,” he said.