US set to ramp up sanctions on Chinese chipmaker
Federal agencies meeting to discuss push to limit China's access to advanced technology
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BEIJING• • US President Joe Biden's administration is considering imposing tougher sanctions on China's largest chipmaker, according to people familiar with the situation, building on an effort to limit the country's access to advanced technology.
The National Security Council is set to hold a meeting today to discuss the potential changes, said the people, who asked not to be identified because the deliberations are private. Agencies that will be represented through their deputies include the Commerce, Defence, State and Energy departments.
The proposal being examined would tighten the rules on exports to Shanghai-based Semiconductor Manufacturing International Corp (SMIC). If one proposal is adopted, companies such as Applied Materials, KLA and Lam Research may find their ability to supply gear to SMIC severely limited.
Current rules specify that machinery "uniquely required" for making advanced chips cannot be exported. One proposal being considered at the meeting would change that to "capable for use", which would include machinery that is also used for making less advanced electronic components.
A Commerce Department spokesman said the agency is working to adopt controls that promote national security and foreign policy interests while not undercutting US technology leadership.
China is "seriously concerned about the relevant reports", Foreign Ministry spokesman Zhao Lijian said yesterday at a regular press briefing in Beijing.
"Certain US politicians have been overstretching the concept of national security, and use science and trade issues as a political tool for ideological purposes," he added.
Further US action against SMIC would complicate matters for companies in the chip supply chain. China is the biggest market for semiconductors since it is home to factories that make a huge chunk of the world's electronic devices. Companies ranging from makers of video games to tech giant Apple have said they cannot make enough products to meet demand because of the shortage of semiconductors.
The auto industry alone is expected to lose more than US$200 billion (S$273.5 billion) in sales because it cannot get enough chips to build all the vehicles people are willing to buy.
For decades, China has largely relied on US chipmaking technology, but it is trying to build up a home-grown semiconductor industry. That would make it an even bigger market for manufacturing equipment.
Even suppliers outside the US face a dilemma. Companies such as Netherlands-based ASML Holding will have to weigh the consequences of ignoring the Biden administration's push and shipping to SMIC and its local peers.
But the federal agencies need to agree on the approach to take and that might not be easy. There is division among agencies, with the Defence Department and National Security Council arguing that the Biden administration should pursue the changes unilaterally.
The Commerce Department, on the other hand, is pushing for coordination with other economies that produce the same technology. It is worried that a unilateral change would give an edge to companies such as Tokyo Electron in Japan and other rivals from South Korea and Taiwan, whose products could supplant US exports.
US Representative Michael McCaul, a Republican from Texas, has been advocating the SMIC policy change for about a year.
"The update to the SMIC licensing policy has nothing to do with the current chip shortages," he said in a statement on Tuesday.
It is about whether the US should be selling the People's Liberation Army of China "the tools it needs to make advanced semiconductors".
The White House is seeking cooperation from other nations, particularly in Asia, to align policies, Commerce Secretary Gina Raimondo said last week.
The administration also has been promoting the so-called Chips Act, a US$54 billion programme aimed at spurring semiconductor production.
"If America puts export controls vis-a-vis China on a certain part of our semiconductor equipment - but our allies don't do the same thing and China can therefore get that equipment from our allies - that's not effective," Ms Raimondo said. "The devil is deeply in the details."
BLOOMBERG
China is "seriously concerned about the relevant reports", Foreign Ministry spokesman Zhao Lijian said yesterday at a regular press briefing in Beijing. "Certain US politicians have been overstretching the concept of national security, and use science and trade issues as a political tool for ideological purposes," he added.
