US tightens chip export controls, China sees loopholes
The US Department of Commerce announced on Monday new restrictions on the export to China of equipment used to produce advanced integrated circuits, including in AI systems. According to the department, these are the most stringent restrictions in this area, but experts say they are less severe than initially planned.
During a press conference call, Commerce Secretary Gina Raimondo announced that the new regulations effectively block the export of 24 types of specialized equipment and three programs used in the production of advanced chips, including in artificial intelligence systems. One hundred forty Chinese semiconductor companies have been added to the blacklist, significantly hindering their ability to do business with American companies. Among them are firms associated with Huawei, a leading Chinese manufacturer of advanced integrated circuits.
The US hits Chinese semiconductor industry
These are the strongest restrictions the United States has ever implemented, emphasized Raimondo in a conversation with reporters.
She added that the goal is "to reduce China's ability to produce the most advanced chips, which the country uses in its military modernization."
However, The Washington Post reports, citing experts and representatives of the US administration, that the restrictions are much milder than planned. They were allegedly softened due to pressure from American companies producing equipment affected by the restrictions, as well as pressure from the Netherlands, Japan, and companies from those countries in the same sector. These negotiations not only led to a softening of export controls but also delayed their implementation, giving China time to stockpile.
According to Gregory Allen, an AI expert from the think tank Center for Strategic and International Studies (CSIS), the US administration chose the worst possible approach.
"The worst thing you can do is dramatically signal the intention to cut off China's access to technology and then have so many legal loopholes and such inept implementation that you incur almost all the costs of this policy for only a fraction of the benefits," he assessed.
This is the third round of restrictions limiting the export of advanced technology to China.
This move was immediately criticized by the authorities in Beijing, who stated that it is a "non-market practice" that will threaten the stability of global supply chains.
China outplays the world
Despite American sanctions, the Chinese semiconductor industry is thriving. Market giants—Huawei and SMIC—have joined forces to produce, among other things, chips for phones, which are smaller than the sanctions envisage. They are using shell companies established by Chinese firms, as recently reported by Puls Biznesu.
The journal also recalls that in October 2022, President Joe Biden's administration imposed sanctions on the Chinese semiconductor industry. This happened a few weeks before the release of ChatGPT. The largest companies from the US, the Netherlands, and Japan were banned from exporting equipment necessary for the production of high-grade processors (smaller than 10 nm) needed for the development of technologies such as artificial intelligence.
Meanwhile, China's largest semiconductor manufacturer, SMIC, can mass-produce 7 nm technology, and next year 5 nm. Experts also note that Huawei, which was the most "harassed" company during the first wave of sanctions imposed by the Trump administration in 2018, has been reborn.
