The U.S. unveiled a set of new regulations Friday that aim to choke off China’s access to advanced chips, the tools necessary to manufacture years-old designs, and the service and support mechanisms needed to keep chip fabrication systems running smoothly.

By Max A. Cherney

On a briefing call with reporters Thursday, administration officials said the goal is to block the People’s Liberation Army and China’s domestic surveillance apparatus from gaining access to advanced computing capabilities that require the use of advanced semiconductors. The chips, tools, and software are helping China’s military, including aiding the development of weapons of mass destruction, according to the officials, who asked to remain anonymous to discuss the administration’s policies freely.

The new rules are comprehensive, and cover a range of advanced semiconductor technology, from chips produced by the likes of AMD and Nvidia to the expensive, complex equipment needed to make those chips. Much of highest-quality chip manufacturing equipment is made by three U.S. companies: KLA, Applied Materials, and Lam Research, and cutting off China’s access to their tools has the potential to damage the country’s ambitions to become a chipmaking powerhouse.

“I think the whole policy of the administration can be justified by the fact that if you sell an AI chip to any entity in China for cloud server activities and that’s the alleged end use, it can also be used elsewhere and there's no way around that problem,” said Mathieu Duchâtel, director of the Asia Program at the Institut Montaigne. Years ago, China adopted a civil-military fusion doctrine that effectively enables the transfer of just about any tech in China to military uses.

The Biden administration’s new controls on chip exports represent a significant shift in U.S. policy related to China. For decades, the U.S. has attempted to keep China two generations of tech behind, typically by denying China access to the tools necessary to make advanced chips, or other technology, themselves. Now, the goal looks to be to cripple China’s ability to produce chips with technology that is nearly a decade old, several generations behind the state-of-the-art capabilities.

I think the whole policy of the administration can be justified by the fact that if you sell an AI chip to any entity in China for cloud server activities and that’s the alleged end use, it can also be used elsewhere and there's no way around that problem.
“Basically they're changing the policy we've been pursuing for the last 25 years and they are going to overtly try to degrade China's military capabilities,” William Reinsch, senior adviser and Scholl Chair in International Business at the Center for Strategic and International Studies, told Protocol earlier this week.

“I think what you will hear is companies saying this is going to make it much more difficult for us to sell to China, and that’s going to affect our revenue, and it’s going to affect our future investments negatively, and make us less competitive. Maybe we’ll have a debate about that,” Reinsch said.

The new restrictions on chip exports set to go into effect Oct. 21 are:

Using a new foreign direct product rule, the U.S. will block any chips that are used in “advanced computing and artificial intelligence applications,” officials said.
The foreign direct product rule can block chips made by non-U.S. companies — including Chinese chip designers — if they use American technology or software.
The new rule could mean that TSMC would be forced to halt production on advanced AI or supercomputer chips designed by Chinese firms that are fabricated in Taiwan, for example.
Commerce will issue another new foreign direct product rule that will apply to components and chips destined for supercomputers in China.
Semiconductor manufacturing equipment rules that will go into effect Friday include:

Tools that are capable of producing logic chips made using fin field-effect transistors, or FinFETs, will be blocked from sales to China. Commonly described in industry shorthand as 14-nanometer, FinFET-based designs are years old, but continue to power the most-advanced smartphones and data center chips. Protocol first reported on the administration’s plans to control the export of these tools in August.
For memory tools, tools capable of fabricating flash storage chips with 128-layer tech or greater, and DRAM that is made with 18-nanometer half-pitch or less will both be blocked from sales to China. Officials said the standards for memory are based on current Chinese capabilities.
The new rules also restrict the servicing and maintenance of the tools, which is vital to keeping advanced equipment in good enough shape to produce working chips at high volume.
Any U.S. citizens currently servicing or supporting tools on the restricted list will have until Wednesday to halt their activity.
The U.S. will also block exports of items China could use to make its own chip manufacturing tools, such as a photolithography light source and other specialized components.
The Commerce Department is also enacting several additional measures:

Officials said that 31 Chinese entities will be added to the unverified list — a group of companies that the U.S. government believes could send tech they buy to restricted entities.
For the 28 Chinese organizations already on the U.S. Entity List, Commerce is expanding the scope of controls, including presumptively denying any licenses because of the risk that tech might be diverted to China’s military.
Officials said that the Commerce Department had made a significant effort to minimize the damage to U.S. companies, and that the policy was carefully tailored. The chip industry has 60 days to submit written comments about the new regulations, and officials said they would adjust the measures if it was appropriate based on the feedback.

The export restrictions are unilateral, and administration officials acknowledge that they will become less effective over time if other countries do not follow suit and enact similar controls.

To most corners of the chip industry, Friday’s tightened export controls were largely anticipated. For months, chip company executives in Washington, D.C., have briefed and lobbied administration officials in order to protect their businesses but also — in some cases — to use the export controls to damage or gain an advantage over rivals.

In recent months, semiconductor equipment makers such as Applied Materials, Lam Research, and KLA began to disclose that they had received notification letters from the Commerce Department over the summer. Those letters blocked the sale of tools capable of making chips with FinFETs, and prevented Nvidia and AMD from selling advanced AI chips to Chinese customers, among other measures.

The White House previewed new details about its approach last month in a speech by National Security adviser Jake Sullivan.

“We previously maintained a ‘sliding scale’ approach that said we need to stay only a couple of generations ahead,” Sullivan said. “That is not the strategic environment we are in today. Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.”