Exclusive: Biden hits China with broader restrictions on exports of US chips and gadgets

By Karen Freifeld and Alexandra Alber

WASHINGTON (Reuters) – Next month the Biden administration plans to expand restrictions on U.S. shipments to China of semiconductors used in artificial intelligence and chipmaking tools, several people familiar with the matter said.

The Commerce Department intends to publish new regulations based on the restrictions sent in letters earlier this year to three US companies — KLA Corp, Lam Research Corp and Applied Materials Inc, the people who spoke on condition of anonymity said. The plan for the new rules has not been previously reported.

The letters, which the companies have publicly acknowledged, prevented them from exporting chipmaking equipment to Chinese factories that produce advanced semiconductors with processes below 14 nanometers unless the sellers obtained Commerce Department licenses.

The rules will also codify restrictions contained in Commerce Department letters sent to Nvidia Corp and Advanced Micro Devices last month directing them to halt shipments of several AI computing chips to China unless they obtain licenses.

Some sources said the regulations will likely include additional measures against China. Restrictions can also be changed and rules published later than expected.

So-called “informed” letters allow the Department of Commerce to bypass lengthy rule-writing processes to quickly put controls in place, but the letters only apply to companies that receive them.

Turning messages into rules would broaden their reach and could subject other US companies that produce similar technology to restrictions. The regulations could apply to companies trying to challenge Nvidia and AMD’s dominance in AI chips.

Intel Corp. and startups like Cerebras Systems are targeting the same advanced computing markets. Intel said it is closely monitoring the situation, while Cerebras declined to comment.

One of the sources said the rules may also impose licensing requirements on shipments to China of products containing the targeted chips. Dell Technologies, Hewlett Packard Enterprise, and Super Micro Computer build data center servers that contain Nvidia’s A100 chip.

Dell and HPE said they are monitoring the situation, while Super Micro Computer did not respond to a request for comment.

A senior commercial official declined to comment on the upcoming measure, but said: “As a general rule, we look to legalize any restrictions found in informed letters with a regulatory change.”

A Commerce Department spokesperson on Friday declined to comment on specific regulations, but reiterated that they are “taking a comprehensive approach to implementing additional measures … to protect US national security and foreign policy interests,” including preventing China from acquiring US technology. Applicable to military modernization.

KLA, Applied Materials and Nvidia declined to comment, while Lam did not respond to requests for comment. AMD has not commented on the specific policy move but has confirmed that it does not expect a “material impact” from the new licensing requirements.

‘choke point’

The planned action comes as President Joe Biden’s administration has sought to stymie China’s progress by targeting technologies where the United States still maintains hegemony.

“The strategy is to throttle China and they’ve discovered that chips are a choke point. They can’t make these things, they can’t make manufacturing equipment,” said Jim Lewis, a technology expert at the Center for Strategy and International. studies. “This will change.”

In an update on China-related measures last week, the Chamber of Commerce, a US business lobby, warned members of imminent restrictions on artificial intelligence chips and chipmaking tools.

“We are now hearing that members should expect a series of rules or perhaps a blanket rule before the midterm elections to codify the guidance in (Commerce Department) recent ‘informed’ letters to chip manufacturers and chip design companies,” the chamber said.

The group also said that the agency plans to add additional Chinese giant computing entities to the trade blacklist.

Reuters was first to report in July that the Biden administration was actively discussing a ban on the export of chip-making tools to Chinese factories that make advanced semiconductors at the 14-nanometer knot and smaller.

Two sources said US officials have reached out to allies to pressure them to enact similar policies so that foreign companies cannot sell technology to China that would prevent US companies from shipping.

“Coordination with allies is key to maximizing effectiveness and minimizing unintended consequences. This should favor broader regulations that others can replicate rather than one-off informed messages,” said Clet Willems, a former Trump administration trade official.

(Reporting by Karen Freifeld and Alexandra Alper; Additional reporting by Stephen Nellis and Jane Lanhei Lee; Editing by Chris Sanders and Cynthia Osterman)

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