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Biden's new export controls stun China's chip industry

It will take the chip industry a little time to fully understand the impacts of the Biden administration's sweeping new export controls.

But it's already clear that they will hit the Chinese sector hard.

Chinese chip companies "are basically going back to the Stone Age," Szeho Ng, managing director at investment bank China Renaissance, told the Financial Times.

US and Korean companies that do semiconductor business with China will also be impacted.

The new rules, announced by the Commerce Department's Bureau of Industry and Security (BIS) Friday, widen existing prohibitions to virtually all kinds of advanced chips and chip manufacturing equipment.

Chinese firms can no longer make high-end semiconductors.
 (Source: Unsplash)
Chinese firms can no longer make high-end semiconductors.
(Source: Unsplash)

The controls were aimed at restricting China's ability to build supercomputers, precision and autonomous military systems and to commit human rights abuses, BIS said.

For the first time, the agency widened the scope to prevent US citizens from working on advanced chip projects – a rule targeted at Chinese and Taiwanese nationals.

A Chinese semiconductor firm executive described it as "a bigger bombshell than stopping us from buying equipment," FT.com said. The company had US passport holders in some of its most important positions, the executive said.

In Tuesday trading on Asian bourses, investors marked down TSMC 8.3% – its lowest level in two years – China's SMIC 4.6%, Samsung 1.4% and SK Hynix 1.1%. On Monday in New York, Lam Research was down 6.4%, KLA 4.7% and Applied Materials 4.1%.

KLA to cut back on China customers

Reuters reported Tuesday that KLA, which makes processes that aid chip manufacture, would cut back on supplying to some China-based customers – including Korean memory chip firm SK Hynix.

KLA, which earns about a third of its revenue in the China market, will stop sales and service to advanced fabs making NAND chips with 128 layers, DRAM chips 18 nm and below, and advanced logic chips, according to an internal memo.

One of KLA's major customers is YMTC, China's biggest memory-maker, recently tipped to become a supplier to Apple. YMTC was one of 31 companies added to the BIS 'unverified' list, which describes firms that US officials had been unable to inspect.

China's Foreign Ministry spokesperson Mao Ning denounced the new measures as an abuse of export controls and an attempt by the US "to maintain its sci-tech hegemony."

A research firm, IC Wise, said in a WeChat post that the Chinese industry had become "numb" to the escalating US sanctions over the past four years and had been left with three unpalatable choices.


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One was to migrate to domestic equipment, which would "take years." Another was to find a collaboration with non-American manufacturers – but this required foreign government backing and still meant doing without key equipment. The other option was to swap out some equipment and switch to OEM for some niche products.

"Now it doesn't matter whether they are in design or manufacture, no one can make high-end chips," IC Wise said.

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— Robert Clark, contributing editor, special to Light Reading

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