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Joe Biden chip export controls designed to give US an advantage over China

The new rules issued last week stem from US concerns that China could use AI to improve military capabilities.

The Biden administration’s restrictions on semiconductor technology exports to China are designed to help the US maintain the greatest possible tech edge over rivals, said an official, who also addressed national security concerns. such as China’s efforts to develop artificial intelligence that can be used militarily. .

The new rules issued last week stem from US concerns that China could use AI to enhance military capabilities, support surveillance of human rights violations, and “distort or produce outcomes that undermine democratic governance and social sowing unrest,” Assistant Secretary of Commerce for Export Administration Thea D. Rozman Kendler told an audience on Thursday during a public appeal.

“China’s military-civilian merger strategy is aimed at removing barriers between its military and civilian research and commercial sectors, which has led to additional controls on China,” she added.

Kendler’s comments were the first since Washington announced sweeping rules to curb the sale of semiconductors and chip-making equipment to its main geopolitical rival. Markets collapsed as investors pondered the broader impact on the Chinese economy and the ramifications for the world’s largest chip companies. On Thursday, Kendler tried to calm investors down.

“We have strictly limited our actions to focus only on the equipment, activities and entities that pose the greatest concern to national security, ensuring that our actions have the least possible impact on commercial activities and no disruptions to the global environment. supply chain,” she said.

The Philadelphia Semiconductor Index turned positive, gaining 2.6% after a previous decline of no less than 5%.

Kendler also emphasized that the US is working with allies on export control measures, after Taiwan’s Economy Minister Wang Mei-hua said in an interview on Wednesday that Taipei and Washington have discussed joint steps to verify the chip technology’s end users and ensure that important products are not sold to the Chinese military.

“We recognize that multilateral controls are more effective than unilateral controls,” Kendler said. “And let me assure you that foreign involvement in these controls” is a priority for the Bureau of Industry and Security, which is responsible for implementing U.S. export control policies.

The US actions, which infuriated Beijing and sparked accusations of unfair targeting, threaten to disrupt a global economy already grappling with a potential recession, rising inflation and ongoing supply chain restrictions.

Signs of trouble are increasing. Applied Materials Inc. lowered its outlook for the fourth quarter, Intel Corp. would lay off thousands of people and US companies including Applied Materials, KLA Corp. and Lam Research Corp., are recalling employees of China’s largest memory chip maker. On Thursday, Taiwan Semiconductor Manufacturing Co. its 2022 capital expenditure target – a key indicator of its own growth expectations in sectors from smartphones to servers and electric vehicles – by about 10%.

Depending on how broadly Washington enforces restrictions, the impact could extend far beyond semiconductors and industries that rely on high-end computing, from electric vehicles and aerospace to gadgets like smartphones.

The new US regulations broadly restrict chipmakers from selling to China artificial intelligence semiconductors and those that can be used for supercomputers. Nvidia Corp. warned in September that government restrictions on the export of AI chips to China could affect hundreds of millions of dollars in revenue, causing the stock to tumble.

Chipmakers can request an exception to those rules from the Department of Commerce. But they must assume that such requests will be denied, senior officials said.

The trade has also put in place a series of restrictions on the supply of US machines capable of making advanced semiconductors. It focuses on the types of memory and logic chips that are at the heart of state-of-the-art design.

Specifically, the limitations relate to the production of logic chips using so-called non-planar transistors made with 16-nanometer technology or slightly more advanced than that, 18-nanometer dynamic random-access memory chips, and Nand-style flash memory chips with 128 layers or more. In general, the smaller the number of nanometers, the better the chip.

On Thursday, Kendler said the US is also restricting exports of items that will be used to develop or manufacture native semiconductor manufacturing equipment in China.

This move could further undermine China’s ambition to build a domestic chip industry as it aggressively encourages alternatives to US chip equipment suppliers, including Applied Materials and Lam Research.

The new rules also prohibit “American persons” from supporting the development or production of chips in Chinese factories.

Kendler said this includes U.S. citizens, an alien permanently resident in the U.S., or a protected person as defined by law, any corporation organized under U.S. law or any jurisdiction within the U.S., including foreign affiliates, and any person in the U.S.

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