Companies Weigh Fallout From US Ban on Sending Chip Tech to China

The Biden administration’s announcement earlier this month that it would ban the transfer of advanced U.S. semiconductor technology to China continues to reverberate through global markets. The ruling by the Department of Commerce affects not only U.S. firms that sell to China but any company whose products contain American semiconductor technology.

In mainland China, according to Bloomberg News, officials from the Ministry of Industry and Information Technology have been summoning executives from domestic semiconductor manufacturers to assess how being deprived of high-tech manufacturing tools from overseas would impact their businesses. And companies that rely on imports of high-end semiconductors are assessing the viability of their businesses going forward.

In the U.S., semiconductor companies and other tech firms that count China among their largest single markets are facing potentially severe damage to their revenues. Other companies that manufacture tech products in China are having to recall U.S. employees because the ban also bars “U.S. persons” from supporting technology covered by the ban.

Internationally, large chipmakers, such as Taiwan Semiconductor Manufacturing Company and South Korea’s Samsung, as well as Netherlands-based ASML, which makes chip manufacturing equipment, are reassessing their business with China as they explore how deeply the new rules will cut into their sales.

“It really is reshaping the market,” said James Lewis, senior vice president and director of the Strategic Technologies Program at the Center for Strategic and International Studies. “The Koreans, the Taiwanese and some American companies are really nervous about it. I mean, everyone’s asking, ‘What can I still sell to China?’ And in some cases, the answer is ‘nothing,'” he told VOA.

Targeting China’s military

The Biden administration has characterized the ban as a national security measure, saying that withholding highly sophisticated semiconductors from China will hamper the development of Chinese weapons and surveillance technology.

The trouble is that the same technology that goes into Chinese weapons systems is also necessary for other goods, including electric vehicles, an area in which China is significantly further advanced than the U.S.

It remains unclear precisely how U.S. authorities will enforce the ban. It primarily targets the most advanced chip technology available, meaning that “mature” chip technology — older and less sophisticated chips — will not be affected.

Where the U.S. draws that line, however, could determine whether Chinese businesses such as smartphone manufacturers and commercial aerospace companies are left alone or devastated.

‘Cold war’ tactic

Experts and pundits saw the imposition of the tough new ban as a dramatic escalation of the Biden administration’s efforts to keep China from being able to advance toward technological parity with the U.S.

Writing for the American news publication Foreign Policy, Edward Alden, a senior fellow at the Council on Foreign Relations, said the move “looks increasingly drawn from the Cold War playbook.” He also noted that “the new restrictions, which will be fully implemented as soon as Oct. 21, go well beyond any previous measures by seeking to freeze China at a backward state of semiconductor development and cut Chinese companies off from U.S. industry expertise.”

In the Financial Times, U.S. national editor and columnist Edward Luce wrote that “Joe Biden this month launched a full-blown economic war on China.”

“His escalation … marks a final break with decades of U.S. foreign policy that assumed China’s global integration would tame its rise as a great power,” he added.

China reacts

Speaking at the start of the Chinese Communist Party’s five-year congress Sunday, during which he is expected to be named to an extraordinary third term as party leader, Xi Jinping did not address the ban directly. However, he did promise to step up investment in areas that would help his country achieve “technology self-reliance.”

“China will move faster to launch a number of major national projects that are of strategic, big-picture and long-term importance,” Xi said.

In a statement provided to VOA by the Chinese embassy in the U.S., spokesperson Liu Pengyu said that he was not aware of any specific meetings being held in China.

“I would like to note that what the U.S. is doing is purely ‘sci-tech hegemony.’ It seeks to use its technological prowess as an advantage to hobble and suppress the development of emerging markets and developing countries,” Liu said. “The U.S. probably hopes that China and the rest of the developing world will forever stay at the lower end of the industrial chain. This will disrupt the global supply chain and industrial chain, and the final result will hurt itself and others alike.”

Industry concerned

Semiconductor companies have reacted carefully to the Biden administration’s decision. Although they are acknowledging the government’s concerns, they are signaling frustration that they were neither given clear guidance about how the ban will be applied nor given an opportunity to consult with the Commerce Department before it was put into place.

In a statement provided to VOA, SEMI, a trade group representing the semiconductor industry, said that its members understand the United States’ national security concerns. In addition, it said, “We are currently evaluating the potential effects of the Commerce Department’s unilateral controls on the semiconductor industry in the U.S. and abroad. We plan to provide feedback to the government on these rules, as they were not previously published for public comment.”

“We believe it is vitally important that the U.S. government implements these rules in close collaboration with and input from our key international partners in order to limit unintended adverse consequences that could reverberate through the domestic supply chain of this critical industry.”
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