US tech controls hinder China chipmakers, but may help some

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HONG KONG- Washington’s latest round of export controls are designed to hinder China’s chipmaking abilities. Yet those same measures will indirectly benefit some homegrown champions.

The United States tightened controls on technology exports to China on Oct. 17, updating measures first released last October.

The rules, which come into effect next month, curb the export of a broader swathe of advanced chips and chipmaking tools to a greater number of countries, including Iran and Russia. They also blacklist Chinese chip designers Moore Threads and Biren. Other revisions include a carveout for chip exports intended for use in consumer devices.

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The restrictions will probably be updated at least annually, according to US Commerce Department Secretary Gina Raimondo.

A spokesperson for the Chinese embassy said it “firmly opposes” the new restrictions, adding that “arbitrarily placing curbs or forcibly seeking decoupling to serve (a) political agenda violates the principles of market economy and fair competition (and) undermines the international economic and trading order.”

The new rules imposed by the administration of President Joe Biden, announced on Tuesday with effect next month, restrict exports of more key components and tools to China, and other countries including Russia. They go beyond hefty US chip curbs unveiled in October 2022 and trade restrictions that Washington persuaded key allies including the Netherlands to adopt much more recently.

For example, the new curbs aim to stop Dutch $236 billion manufacturer ASML supplying certain extreme ultraviolet lithography equipment used to print features onto microchips: that makes the rules more rigorous than those the Netherlands implemented at Washington’s behest just last month. The updates also close loopholes, effectively preventing re-exports by stopping sales to nations friendly to Beijing, and blocking purchases of high-end artificial intelligence chips designer Nvidia had developed for the China market.

Yet the measures carry an explicit exemption for integrated circuits destined for consumer electronics, focusing instead on chips and devices that could be used for AI and military applications. That suggests Washington is chiefly concerned about protecting its national security, rather than attempting to completely crush the industry in the People’s Republic.

Domestic companies that can fill the holes left in China’s chip supply chain can still prosper. Some, including $8 billion Cambricon Technologies and $19 billion Hygon Information Technology saw shares pop on Tuesday. Stepping in to replace retreating Western players, equipment makers like Naura and AMEC are already winning more business, research from Huatai Securities shows: domestic players won 62 percent  of machinery equipment tenders by Chinese foundries in July to August, compared with 36 percent  in March to April.

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