U.S. Sanctions Target Chinese Chipmakers, Aiming to Curb ASML Rival Growth

According to Bloomberg, as the Biden administration nears its end, it is devising new regulations aimed at impeding the progress of China’s semiconductor industry. However, these forthcoming rules appear less stringent than initially anticipated. The primary intent of these measures is to target specific Chinese chipmakers, focusing particularly on manufacturers of chipmaking equipment in China and restricting access to fabrication tools that could enhance China’s AI capabilities.

Rather than imposing broad restrictions across the industry, these new rules will narrowly target specific Chinese entities. Notably, they will affect two fabrication plants operated by Semiconductor Manufacturing International Corp. (SMIC). Out of approximately 12 suppliers known to serve Huawei, which is listed on the U.S. Entity List, only a select few will be added to this list, thus facing a ban from accessing U.S. technology. Others, including Huawei itself, are set to continue their operations and serve their clients.

The restrictions will also touch on aspects related to high-bandwidth memory (HBM), yet ChangXin Memory Technologies (CXMT), a Chinese company with capabilities to manufacture HBM2, will not be directly impacted.

Nonetheless, the restrictions will encompass over 100 entities involved in the nascent semiconductor manufacturing equipment sector. These companies, often backed by government funding, aim to develop chipmaking technology that could eventually replace equipment from major global suppliers like ASML, Applied Materials, KLA, Lam Research, and Tokyo Electron. The goal is to allow Chinese firms such as Huawei and SMIC to manufacture chips using advanced process technologies without limitations — a scenario the U.S. wishes to prevent.

The details of these proposed regulations are not yet finalized, and changes could occur before the President signs off on the bill. The plan as it stands is a balance between hindering China’s technological advancements and reducing potential economic fallout for American and allied businesses. These restrictions are expected to be announced by next Monday and are considered to be less extreme than what was originally thought.

These proposed measures come after intense lobbying efforts by American semiconductor companies like Applied Materials, KLA, and Lam Research, who argued against broad restrictions. They contended that overly severe measures would disadvantage them competitively against international companies like Tokyo Electron from Japan and ASML from the Netherlands. Both Japan and the Netherlands have implemented export restrictions akin to the U.S.’s earlier 2022 measures but have been reluctant to intensify them despite U.S. encouragement, including threats of imposing extraterritorial rules like the Foreign Direct Product Rule (FDPR).

This news of potentially moderated restrictions has led to a boost in semiconductor stock prices worldwide.