US CHINA Tech WAR: ALL YOU NEED TO KNOW Complete Explanation

The Biden administration’s sweeping new export controls aimed at cutting off China from obtaining chips used in supercomputers has caused the “complete collapse” of the Communist country’s semiconductor industry, according to one expert. “This is what annihilation looks like: China’s semiconductor manufacturing industry was reduced to zero overnight,” Lidang, CEO of Hedgehog Lab, said in a Twitter thread.

Rules announced by the US Department of Commerce last week restricting “US persons” from involvement in manufacturing chips in China had led to mass resignations of American executives from Chinese firms.

Lidang said this had the effect of “paralyzing Chinese manufacturing overnight”, and that the industry was in “complete collapse” with “no chance of survival”.

The rules which came into effect on Couple Of days ago in Octover would bring severe damage to “Chinese national security as a whole”, Lidang said.

“This is nothing like the 10+ rounds of performative sanctioning during the Trump years — this is a serious act of industry-wide decapitation.”

The US Commerce Department said in a statement announcing the new controls that they were in response to China using supercomputers and semiconductors to create weapons of mass destruction and commit human rights abuses.

“The threat environment is always changing, and we are updating our policies today to make sure we’re addressing the challenges posed by (China) while we continue our outreach and coordination with allies and partners,” Under Secretary of Commerce for Industry and Security Alan Estevez said in a statement.

California-based Applied Materials, a leading manufacturing equipment supplier, has downgraded its August-October earnings outlook, while fellow American equipment suppliers Lam Research and KLA have temporarily suspended support for some Chinese chipmakers.

Applied Materials revised its revenue forecast for the August-October quarter from about $6.65 billion to about $6.4 billion, the company said Wednesday. The earnings-per-share forecast was also lowered. While easing supply chain disruptions are seen boosting performance, stricter regulations on China are expected to drive sales down by $250 million to $550 million.

Company sales to China for the May-July quarter were $1.77 billion, the largest by region and accounting for 27% of the total. New rules issued by the U.S. Commerce Department on Oct. 7 require advanced approval for equipment used in the manufacture of advanced semiconductors to be exported to China.

Applied Material expects its semiconductor wafer fabrication equipment to be affected by the regulation.

Meanwhile, U.S. media reported Lam Research, KLA and others have temporarily suspended deliveries of manufacturing equipment and support for Yangtze Memory Technologies, a major Chinese chipmaker, and have begun pulling out personnel stationed at the Chinese company. A spokesperson for Lam did not respond to a Nikkei inquiry, and a KLA representative would not comment.


Yangtze Memory is a major manufacturer of flash memory used in smartphones and other devices, and is said to have grown rapidly with significant financial support from state-backed funds and other sources. The Commerce Department regulations also expanded the list of companies and organizations that require export controls, adding Yangtze Memory as a new target.

The U.S. has been gradually tightening semiconductor restrictions on China, and technology requirements are more stringent this time around. The range of what is defined as “advanced” has been broadened from circuit widths of 10 nanometers or less to 14 nm to 16 nm or less for logic semiconductors used for arithmetic operations.

“The impact on the industry will be substantial,” said a Japanese industry insider, noting that the restrictions will now also apply to memory chips.

The U.S. aims to deter China from developing missiles and other weapons using high-performance semiconductors by tightening regulations while also bolstering industrial competitiveness at home. But global semiconductor equipment sales to China are projected to be $22 billion this year, accounting for 22% of the total, after Taiwan and South Korea. Regulation has become a double-edged sword that also drags down the performance of U.S. companies, revealing the complexity of restructuring supply chains that span national borders.

What are latest US tech control rules?
The latest tech export control rules announced by the Biden administration not just target companies but also target individuals.

Under these rules, companies would require licenses to export sensitive technology to China-based entities.

The Verge reported, “The new rules require manufacturers, like Intel and Micron, to receive a license from the Commerce Department in order to export semiconductors and chip-making equipment to Chinese companies. In addition, the administration issued several foreign direct product rules, banning international companies from exporting chips built with US technology.”

The total size of the chip-based industry that might see substantial disruption with the rules is around $550 billion.

The following measures announced by Biden administration:

1. Ban on sending chips for artificial intelligence (AI) and high-performance computing and gear for chip production to China. These restrictions are “intended to sever the flow of US know-how to China’s military and surveillance systems”, notes Bloomberg, which adds, “China’s AI chipmakers, including Biren, may face some restrictions on outsourcing production to Taiwan Semiconductor Manufacturing Company (TSMC).”

2. Chip-making gear restrictions covering production of both logic and memory chips.

Bloomberg explains, “Logic chips using so-called nonplanar transistors made with 16-nanometer technology or anything more advanced than that. Generally speaking, the smaller the nanometers, the more capable the chip…Foreign companies such as Samsung Electronics Co. and SK Hynix Inc. can apply for licenses to continue acquiring machinery they need for their plants in China.”

3. Rules also effectively prohibit US persons from “supporting” the development or manufacture of chips covered by the restrictions. It is this rule that puts US nationals in Chinese chip-related companies in a difficult spot.

4. The rules expand Unverified List that acts as a precursor to the Entity List, which bans exports of US designs and technology to entities such as Huawei

China’s top semiconductor equipment maker Naura Technology Group has told its American employees in China to stop taking part in component and machinery development to comply with Washington’s restrictions on the involvement of US citizens in key facilities on the mainland, according to a source briefed on the decision.

In an internal notice, the Beijing-based company asked its American engineers to stop working on research and development projects with immediate effect, the source said.

The notice was issued after the US Bureau of Industry and Security regulation restricted the “ability of US persons to support the development or production” of chips at certain China-located semiconductor fabrication facilities without a licence.

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