The US has moved to stem the supply to China of microchips and associated high-end technology used in advanced computing and military applications.

On Friday (7 October), President Joe Biden’s administration introduced new rules limiting companies from exporting chips and chipmaking equipment to China, reports Reuters.

The sweeping export controls aim to cut China off from certain semiconductor chips made anywhere in the world with US equipment, stopping shipments of equipment to wholly Chinese-owned factories producing advanced logic chips.

The rules from the US Commerce Department’s Bureau of Industry and Security (BIS) will also apply to new export licence requirements to older and less advanced chips destined for Chinese companies.

Jim Lewis, a technology and cybersecurity expert at US think tank the Center for Strategic and International Studies (CSIS), told Reuters: “This will set the Chinese back years.”

Blacklist threat

Although the rules won’t apply to foreign makers of chipmaking equipment, another limitation could make it easier for BIS to blacklist companies if their governments demonstrate “sustained lack of cooperation” with US trade policy, reports Politico.

Senior US government officials have acknowledged in a briefing on Thursday that they had yet to secure solid promises from allies that they would implement similar measures.

Further action

The new rules are just the first of a series of expected actions from the administration and US Congress before year’s end.

An executive order is expected to strengthen oversight of American investment in China, as well as one limiting data collection from Chinese firms.

Cold War approach

Commerce Department official Alan Estevez said the aim is to keep “sensitive technologies with military applications” away from China’s military, intelligence and security services, reports DW.com.

This summer, the Biden administration passed a $280 billion measure to boost the US semiconductor industry and is keen to maintain its advantage over China.

Beijing responded by saying that the restrictions amounted to an abuse of trade measures and would hurt both US and Chinese businesses.

‘Back to the Stone Age’

According to the FT, China’s entire chip industry is bracing for similar pain that Huawei experienced two years ago when it was hit by US sanctions.

“To put it mildly, [Chinese companies] are basically going back to the Stone Age,” said Szeho Ng, managing director at financial institution China Renaissance.

Taiwan compliance

Reuters reports that Taiwan – the world’s leading semiconductor manufacturer – has signalled it would comply with the new export controls.

A statement from Taiwan’s Economy Ministry said: “Taiwan’s semiconductor industry has long served global customers and attaches great importance to compliance with laws.”

Component shortages

Meanwhile, car boss, Carlos Tavares, the CEO of Stellantis, has predicted semiconductor shortage will continue to bedevil the car industry next year, reports Verdict.

“The situation will remain very complicated until the end of 2023, then will ease a little,” said Tavares.

He added that “semiconductor manufacturers have an interest in making business with us again, especially as they’re raising prices”.