US restricts semiconductor exports to China from September 2022.
Context
In September 2022, US semiconductor design firms Nvidia and Advanced Micron Devices were reportedly told to restrict their exports of high-end chips by the Biden administration. Then, on October 7, 2022, the U.S. Commerce Department announced plans to restrict exports to China in the high tech industries of semiconductors and computing. Among these new rules, which took effect on October 21, 2022, were the introduction of new control classifications for these technologies on the US’ Commerce Control List, and new license requirements with a reported “presumption of denial” for the export of the majority of these technologies to China (Reuters published a detailed list of all new mechanisms introduced, here). These restrictions were reportedly communicated to leading US companies KLA Corp, Lam Research Group, and Applied Materials Inc, earlier in 2022, giving them advanced warning of the mechanisms but also requiring them to implement the rules earlier. Subsequently, in mid-December 2022 major Chinese semiconductor manufacturer YMTC (and 21 other Chinese firms) were named on a US trade blacklist.
The broad context here is great power competition between the US and China, and particularly fears among US policymakers that Beijing could seek to use US chip technology in its military systems. At the time of the initial measures in September 2022, a spokesperson for the US Commerce Department told press that “we are taking a comprehensive approach to implement additional actions necessary related to technologies, end-uses, and end-users to protect U.S. national security and foreign policy interests.”
In August 2023, the US announced the removal of 27 Chinese companies from its Commerce Control List, a move welcomed by China.
In December 2024, The US initiated a Section 301 investigation into China’s semiconductor industry pursuant to pursuant to s 301(b) and s 302(b) of the Trade Act 1974. The announcement explained the investigation in the following terms: “Evidence indicates that China seeks to dominate domestic and global markets in the semiconductor industry and undertakes extensive anticompetitive and non-market means, including setting and pursuing market share targets, to achieve indigenization and self-sufficiency. China’s acts, policies, and practices appear to have and to threaten detrimental impacts on the United States and other economies, undermining the competitiveness of American industry and workers, critical U.S. supply chains, and U.S. economic security.”
Responses
i) Chinese government and industry responses.
Chinese commerce ministry spokesperson Shu Jieting labelled the initial September 2022 measures an attempted “tech blockade”, adding that “[t]he U.S. continues to abuse export control measures to restrict exports of semiconductor-related items to China, which China firmly opposes.” China subsequently strongly opposed these measures, and the US’ attempts to pressure its junior partners in Japan and the Netherlands to impose similar restrictions, which Beijing labelled “Chip Hegemony”
In October 2022, the Chinese government denounced the expanded measures by the US as a form of “technology bullying”.
Part of China’s reported response to these measures has been to develop open-source chip technologies. Chinese government and state entities reportedly invested US$50 million+ in the open-source alternative RISC-V between 2018 and 2023 – with one Chinese government research commission reporting in April 2023 that “[t]he biggest advantage of the RISC-V architecture is that it is geopolitically neutral”.
On 23 December 2024, the Ministry of Commerce of the PRC stated that this investigation was ‘a severe infringement of WTO’ rules and was driven by political motives: “the US launched this investigation to suppress China and serve to its domestic political needs, which will disrupt the semiconductor global supply chain and also do harm to the interests of American domestic businesses and consumers…”
(ii) US government and industry responses
In September 2022 US firm Nvidia responded to the restrictions by reportedly acknowledging that its new flagship chip, the H100, could be impacted – and that it could stand to lose US$400 million in sales to China if its buyers decided not to purchase alternative Nvidia products. At the same time, a spokesperson for US firm Advanced Micro Devices told pressthat the company thought it would likely not have a material impact on the business’ financial performance.
The US government recognised that these measures were unlikely to be successful in limiting China’s access to critical technologies – and could damage US business interests – if done unilaterally. One official told press that “We recognize that the unilateral controls we’re putting into place will lose effectiveness over time if other countries don’t join us… And we risk harming U.S. technology leadership if foreign competitors are not subject to similar controls”. Therefore, the US government successfully put pressure on other leading semiconductor manufacturing countries, Japan and the Netherlands, to impose similar restrictions.
(iii) Other states
In March 31 2023, the Japanese government announced plans to restrict semiconductor manufacturing equipment exports to China, and in June 2023 the Netherlands announced that it would be restricting exports of some semiconductor equipment.
Status
Reports continue to suggest that the US, together with its allies Japan and the Netherlands, are seeking new ways to strengthen these restrictions.
Reference list
Al Jazeera. 2024. “US roll outs new export controls aimed at restricting China’s chip industry.” Al Jazeera. September 6. Available at: https://www.aljazeera.com/ economy/2024/9/6/usroll-outs-new-export-controls-aimed-at-hobbling-chinas-chip-industry
Alper, A. 2022. “Biden blacklists China’s YMTC, crackdowns on AI chip sector.” Reuters. December 16. Available at: https://www.reuters.com/technology/biden-blacklist-chinas-ymtc-crackdown-ai-chip-sector-2022-12-15/
Baptista, E. 2024. “China bets on open-source chips as US export controls mount.” Reuters. February 5. Available at: https://www.reuters.com/technology/china-bets-open-source-chips-us-export-controls-mount-2024-02-05/
CNBC. 2023. “Japan to restrict chipmaking equipment exports as it aligns with U.S.” CNBC. March 31. Available at: https://www.cnbc.com/2023/03/31/japan-to-restrict-chipmaking-equipment-exports.html
Freifeld, K. and A. Alper. 2022. “Exclusive: Biden to hit China with broader curbs on U.S. chip and tool exports -sources.” Reuters. September 16. Available at: https://www.reuters.com/business/exclusive-biden-hit-china-with-broader-curbs-us-chip-tool-exports-sources-2022-09-11/
King & Wood Mallesons. 2022. ‘The implication of the UVL on (Chinese) companies and the coping strategy amid new export control policies by the US’ [美国出口管制新政下——未经核实清单 (UVL) 对企业的影响及应对]. October 13. Available at: https://www.kwm.com/cn/zh/insights/latest-thinking/impact-of-unverified-list-on-enterprises-and-countermeasures-under-new-us-export-control-rules.html.
Ministry of Commerce of the People’s Republic of China. 2022. ‘The spokesman of the Ministry of Commerce responded to the incident that the US upgraded export control measures on the export of semiconductor to China and amended the Unverified List’ [商务部新闻发言人就美商务部升级半导体等领域对华出口管制并调整出口管制“未经验证清单”应询答记者问]. October 10. Available at: https://www.mofcom.gov.cn/xwfb/xwfyrth/art/2022/art_3088eda9585040e785c43cd23e656fca.html.
Ministry of Commerce of the People’s Republic of China. 2023. ‘The spokesman of the Ministry of Commerce responded to the incident that the US removed 27 Chinese entities from the Unverified List’ [商务部新闻发言人就美商务部将27家中国实体移出出口管制“未经验证清单”答记者问]. August 22. Available at: https://www.mofcom.gov.cn/xwfb/xwfyrth/art/2023/art_ed99312c558f440e9b044c0b787d0b28.html
Ministry of Foreign Affairs of the People’s Republic of China. 2022. ‘Spokesman for the Ministry of Foreign Affairs, Mao Ning, held a regular press conference on 08 October 2022’ [2022年10月8日外交部发言人毛宁主持例行记者会]. October 8. Available at: https://www.fmprc.gov.cn/web/wjdt_674879/fyrbt_674889/202210/t20221008_10779681.shtml.
Nellis, S., K. Friefeld, and A. Alper. 2022. “U.S. aims to hobble China’s chip industry with sweeping new export rules.” Reuters. October 10. Available at: https://www.reuters.com/technology/us-aims-hobble-chinas-chip-industry-with-sweeping-new-export-rules-2022-10-07/
Nellis, S. and J. Lee. 2022. “U.S. officials order Nvidia to halt sales of top AI chips to China.” Reuters. September 1. Available at: https://www.reuters.com/technology/ nvidia-says-us-has-imposed-new-license-requirement-future-exports-china-2022-08-31/
Office of the United States Trade Representative. 2024. ‘USTR Initiates Section 301 Investigation on China’s Acts, Policies, and Practices Related to Targeting of the Semiconductor Industry for Dominance’ (23 December 2024), available at: https://ustr.gov/about-us/policy-offices/press-office/press-releases/2024/december/ustr-initiates-section-301-investigation-chinas-acts-policies-and-practices-related-targeting.
Sterling, T. 2023. “Dutch curb chip equipment exports, drawing Chinese ire.” Reuters. June 30. Available at: https://www.reuters.com/technology/amid-us-pressure-dutch-announce-new-chip-equipment-export-rules-2023-06-30/