EXCLUSIVE: Biden To Hit China With Broader Restrictions On US Chip And Tool Exports

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Semiconductor chips are seen on a computer circuit board in this illustration picture taken on February 25, 2022. REUTERS/Florence Lo/Illustration/File Photo

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WASHINGTON, Sept 11 (Reuters) – The Biden administration next month plans to expand restrictions on U.S. shipments to China of semiconductors used for artificial intelligence and chip-making tools, multiple people familiar with the matter said.

The Commerce Department intends to publish new regulations based on restrictions communicated in letters earlier this year to three US companies: KLA Corp. (KLAC.O)Lam Research Corp. (LRCX.O) and Applied Materials Inc. (AMAT.O)the people said, speaking on condition of anonymity. The plan for the new rules has not been previously reported.

The letters, which the companies publicly acknowledged, prohibited them from exporting chipmaking equipment to Chinese factories that produce advanced semiconductors with processes smaller than 14 nanometers unless the vendors obtain licenses from the Commerce Department.

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The rules would also codify restrictions in Commerce Department letters sent to Nvidia Corp. (NVDA.O) and advanced microdevices (AMD.O) last month, telling them to stop shipments of various artificial intelligence computer chips to China unless they were licensed. read more

Some of the sources said the regulations would likely include additional action against China. The restrictions could also be changed and the rules published later than expected.

So-called “you know” letters allow the Commerce Department to bypass lengthy rule-writing processes to quickly implement controls, but the letters only apply to the companies that receive them.

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

Intel Corporation (INTC.O) 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 source said the rules could also impose licensing requirements on shipments to China of products containing the specific chips. Dell Technologies (DELL.N)Hewlett Packard Company (HPE.N) and super microcomputer (SMCI.O) make data center servers that contain Nvidia’s A100 chip.

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

A senior Commerce official declined to comment on the upcoming action, but said: “As a general rule, we look to codify any restrictions that are in informed letters with a regulatory change.”

A Commerce Department spokesman on Friday declined to comment on specific regulations, but reiterated that it is “taking a comprehensive approach to implement additional actions … to protect US national security and foreign policy interests.” , including to prevent 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 did not comment on the specific policy move, but reaffirmed that it does not anticipate a “material impact” from its new licensing requirement.

‘BOTTLENECK’

The planned action comes as the administration of President Joe Biden has sought to thwart China’s advances by targeting technologies in which the United States still holds sway.

“The strategy is to choke China and they’ve found 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 Strategic and International Strategies. Studies. “That will change.”

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

“Now we’re hearing that members should expect a set of rules or maybe a general rule before the midterm elections to codify guidance in recently issued ‘you know’ letters (Department of Commerce) for chip teams and chip design companies, the chamber said.

The group also said the agency plans to add additional Chinese supercomputing entities to a trade blacklist.

Reuters was the first to report in July that the Biden administration was actively discussing banning exports of chipmaking tools to Chinese factories that make advanced semiconductors at the 14-nanometer node and smaller. read more

US officials have reached out to allies to pressure them to enact similar policies so that foreign companies cannot sell technology to China that US companies cannot ship, two of the sources said.

“Coordination with allies is key to maximizing effectiveness while minimizing unintended consequences,” said Clete Willems, a former Trump administration trade official. “This should favor broader regulations that others can replicate rather than single ‘be informed’ charters.”

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Information from Karen Freifeld and Alexandra Alper; Additional reporting by Stephen Nellis and Jane Lanhee Lee; Edited by Chris Sanders and Cynthia Osterman

Our standards: The Thomson Reuters Trust Principles.

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