New US export restrictions target China's chip industry
On Monday, the U.S. Department of Commerce announced new restrictions on the export of equipment to China used for producing advanced integrated circuits, including those in AI systems. According to the department, these are the strongest restrictions in this area, although experts suggest they are milder than initially planned.
2:33 PM EST, December 2, 2024
During a press conference call, Commerce Secretary Gina Raimondo announced that the new regulations effectively block the export of 24 types of specialized equipment and three programs used in the production of advanced chips, including in artificial intelligence systems. One hundred forty Chinese semiconductor companies have been added to the blacklist, significantly hindering their ability to do business with American companies. Among them are firms associated with Huawei, a leading Chinese manufacturer of advanced integrated circuits.
The U.S. hits Chinese semiconductor industry
These are the strongest restrictions the United States has ever implemented,emphasized Raimondo in a conversation with reporters. She added that the goal is "to reduce China's ability to produce the most advanced chips, which the country uses in its military modernization."
However, "The Washington Post" reports, citing experts and representatives of the U.S. administration, that the restrictions are much milder than originally planned. They were allegedly softened due to pressure from American companies producing the affected equipment, as well as pressure from the Netherlands, Japan, and companies from those countries in the same sector. These negotiations not only led to a softening of export controls but also delayed their implementation, giving China time to stockpile.
According to Gregory Allen, an AI expert from the think tank Center for Strategic and International Studies (CSIS), the U.S. administration chose the worst possible approach.
"The worst thing you can do is dramatically signal the intention to cut off China's access to technology and then have so many legal loopholes and such inept implementation that you incur almost all the costs of this policy for only a fraction of the benefits," he assessed.
This is the third round of restrictions limiting the export of advanced technology to China.
This move was immediately criticized by the authorities in Beijing, who argued that it is a "non-market practice" that will threaten the stability of global supply chains.
China outplays the world
Despite American sanctions, the Chinese semiconductor industry is thriving. Market giants Huawei and SMIC have joined forces to produce chips for phones smaller than the sanctions envision. They are using shell companies established by Chinese firms, as recently reported by Puls Biznesu.
The journal also recalls that in October 2022, President Joe Biden's administration imposed sanctions on the Chinese semiconductor industry, a few weeks before the release of ChatGPT. The largest companies from the U.S., the Netherlands, and Japan were banned from exporting equipment necessary for producing high-grade processors (smaller than 10 nm) needed to develop technologies such as artificial intelligence.
Meanwhile, China's largest semiconductor manufacturer, SMIC, can mass-produce 7 nm technology and will move to 5 nm next year. Experts also note that Huawei, which was the most "harassed" company during the first wave of sanctions imposed by the Trump administration in 2018, has been revitalized.
