Biden Administration Set to Further Tighten Chipmaking Exports to China

The Biden administration is working to further tighten restrictions on the export of semiconductor manufacturing gear to China, escalating rules aimed at preventing the country from developing an advanced chip industry. 
The government has briefed US companies about the plan, telling them that it expects to announce the new restrictions as early as next month, according to people familiar with the situation. The rules may as much as double the number of machines that require special licenses for export, creating fresh hurdles for makers of the equipment such as Applied Materials Inc., said the people, who asked not to be identified because the deliberations are private.
The move would further upend a chipmaking industry that’s already coping with rules imposed in October. Those restrictions required export licenses for certain machines and limited US citizens from working in China and other countries that could pose a threat to national security. There are also provisions limiting the support or sale of technology for specific types of products.
With the latest provisions, the administration plans to coordinate with the governments of Netherlands and Japan, two other key countries for chip manufacturing gear, according to the people. The US doesn’t plan to water down its plans if those other nations adopt weaker guidelines, according to a person familiar with the administration’s plans.
Representative for the White House’s National Security Council and the Department of Commerce, which oversees this process, declined to comment.
About 17 of the multimillion-dollar machines that are vital for making semiconductors currently require licenses, most notably if Chinese customers are trying to buy them. That number is set to double when including restrictions imposed by Tokyo and The Hague, according to the people.
The US has three major manufacturers of chip equipment: Applied Materials, KLA Corp. and Lam Research Corp. Together with with Japan’s Tokyo Electron Ltd. and the Netherlands’ ASML Holding NV, they dominate the industry. Without access to their best products, it’s impossible to build factories capable of the most advanced chipmaking.
Shares of the companies fell on Friday, part of a broader selloff. Applied Materials and Lam both declined 2.3%, while KLA slumped 2.9%. 
The restrictions have come with a price for the industry. US companies have been forced to warn investors that loss of access to the China market will cost them billions of dollars in revenue. To even the playing field — and tighten the ring around China’s nascent chip efforts — the Biden administration has been lobbying Tokyo and The Hague to place the same limits on their companies. 
Earlier this week, the Dutch government said it is preparing restrictions on certain chipmaking machines. A new proposal would rein in exports of so-called immersion DUV lithography products, adding to restrictions that already exist for the most cutting-edge lithography machines. This equipment is critical to producing the world’s most advanced chips.
The rules are expected to be published before the summer, according to a letter sent by the government’s minister of foreign trade to lawmakers on Wednesday. But, unlike the US, Dutch government didn’t discuss restrictions on its citizens or specify limits on the end use of chip machinery.

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