The Biden administration is considering additional restrictions on the sale of semiconductor equipment and artificial intelligence (AI) memory chips to China, sources familiar with the matter told Bloomberg.
The restrictions could be announced as early as next week. However, the timing and specifics of the rules have shifted several times, and nothing is final until the official release.
These new measures follow months of negotiations between U.S. officials and discussions with allies in Japan and the Netherlands, alongside intense lobbying by American chip equipment makers. The latter group has warned that tougher measures could severely impact their business.
Biden administration softens tough measures
The latest proposal contains significant differences from earlier drafts, according to the sources. One major change is the list of Chinese companies that will face trade restrictions. Previously, the U.S. had considered sanctioning six suppliers of Huawei, China’s telecom giant at the heart of its technology sector. Officials were aware of at least half a dozen more Chinese companies potentially affected.
However, under the new proposal, only some of these Huawei suppliers will be added to the restricted list. ChangXin Memory Technologies, which is attempting to develop AI memory chip technology, will be exempt from the measures.
The final version of U.S. controls will also include provisions targeting high-bandwidth memory chips, which are essential for data storage and critical to the development of artificial intelligence.
Partial victory for U.S. companies doing business with China
Major companies like Samsung Electronics, SK Hynix, and Micron Technology—a leading U.S. memory chip maker—are expected to be impacted by the new measures.
In reaction to the news, Japanese chip stocks surged. Tokyo Electron saw a 10% gain in early trading, Screen Holdings rose by around 10%, and Kokusai Electric surged by 23%.
The rules will also impose sanctions on two chip factories owned by Huawei’s chip manufacturing partner, Semiconductor Manufacturing International.
The new restrictions will focus on Chinese companies that produce semiconductor manufacturing equipment rather than the fabrication facilities responsible for producing chips.
This move is seen as a partial victory for U.S. chipmakers, including Lam Research, Applied Materials, and KLA, which have been calling for an easing of unilateral U.S. restrictions on key Chinese companies, including the six Huawei suppliers.
Dutch and Japanese position remains unclear
While the U.S. has made progress with its allies in imposing sanctions, the position of Japan and the Netherlands remains uncertain. Both countries have imposed some restrictions on China, in partial compliance with U.S. measures from 2022. However, they have recently resisted further U.S. pressure for tighter controls.
The new U.S. rules will continue to exempt allies like Japan and the Netherlands from provisions of the so-called Foreign Direct Product Rule (FDPR), sources familiar with the matter have said.
It remains unclear whether Japan or the Netherlands will impose additional restrictions on Chinese companies that the U.S. plans to sanction.
