The top Republican on the House Foreign Affairs Committee is asking the Commerce Department to provide its licensing data and communications with chip companies, along with a broad swathe of related information, to make sure the agency is implementing its new China controls “fairly across all market players.”
Exports to China
A Republican-backed bill introduced in the House could lead to the transfer of export control authorities from the Commerce Department to the Defense Department. The bill, introduced Oct. 28 by Reps. Jim Banks, R-Ind., Rob Wittman, R-Va., and Greg Steube, R-Fla., includes language critical of the Bureau of Industry and Security, saying the agency has made “little progress” in controlling emerging and foundational technologies under the Export Control Reform Act and that BIS’s export control authorities should be revoked.
Nearly a month after the U.S. announced new export controls on advanced computing and semiconductor equipment destined to China, lawyers and companies are still grappling with what they say is a complex set of regulations and are awaiting clearer government guidance on how and whether their activities are covered. The dense regulations, along with lengthy response times from the Bureau of Industry and Security, have caused firms to delay decisions on shipments until they can better understand their risks and BIS’s due diligence requirements, trade attorneys and industry officials said in recent interviews.
New U.S. restrictions on semiconductor exports to China likely will have a “truly devastating impact” on China’s access to advanced semiconductors within the next three years, the Carnegie Endowment for International Peace said in an Oct. 27 report. Even though China has been expecting the controls and has stockpiled some chips and semiconductor manufacturing equipment, those stockpiles will eventually “dwindle” and the country “will likely be forced to step backward in technological time and use less advanced chips that the industry has long since moved past,” the report said.
The Bureau of Industry and Security is confident it will soon convince allies to adopt similar semiconductor export controls on China, Undersecretary Alan Estevez said, adding that he expects some type of “multilateral deal” finalized in the “near term.” Estevez, speaking during an Oct. 27 event hosted by the Center for a New American Security, also said BIS isn’t “done” imposing chip-related controls and said companies should expect new restrictions on emerging technologies, including on biotechnologies, artificial intelligence software and items in the quantum sector.
The Bureau of Industry and Security recently sent a proposed charging letter to Seagate Technology alleging that it violated U.S. export controls by providing controlled items to a company on the Entity List. Seagate said the Aug. 29 letter accused it of violating the Export Administration Regulations by providing hard disk drives to the blacklisted company and its affiliates between August 2020 and September 2021.
Although the new U.S. export controls against China are likely to have minimal impacts on the U.S. semiconductor industry, a broader implementation of the controls could quickly raise costs on U.S. and allied suppliers and hurt the domestic chip industry, the Rhodium Group said in a report this month. The research firm said damages to semiconductor companies “could balloon quickly under a tightening of controls,” which it believes is “highly plausible.”
Taiwan Semiconductor Manufacturing Company has halted its work on advanced silicon for a Chinese technology startup to make sure it’s complying with new U.S. export controls (see 2210070049), Bloomberg reported Oct. 22. The Taiwanese chipmaker suspended production for Biren, one of China’s “most promising semiconductor designers,” until it can determine whether Biren’s products are covered by the U.S.’s new advanced chip restrictions, the report said. It said TSMC halted production after coming across public information that Biren’s products outperform Nvidia’s A100 chips, which are captured under the U.S. controls. TSMC didn’t comment.
China’s Ministry of Industry and Information Technology held emergency meetings this week with the country’s leading semiconductor firms to assess the impact of new U.S. chip restrictions, Bloomberg reported Oct. 19. Chinese officials stressed to executives from Yangtze Memory Technologies Co., supercomputer company Dawning Information Industry and others that the domestic market would provide enough demand to make up for any lost sales caused by the U.S. export restrictions, the report said. But the government officials also “appeared uncertain about the way forward and at times appeared to have as many questions as answers for the chipmakers.” During the meeting, YMTC warned the government that “its future may be in jeopardy,” the report said.
Many companies are still trying to assess the “exact implications” of the U.S.’s new export controls on China (see 2210070049) and are hoping guidance from the Bureau of Industry and Security provides some answers, said Paul Trulio, an expert at the Center for Strategic and International Studies. Trulio told Bank of America that the controls are “still in the early stage” and it's too soon to “quantify the impact,” according to an Oct. 19 readout of a call published by the bank.