‘No ... reconciliation’ as U.S. slams China chips
The Biden administration’s new restrictions on technology exports to China could undercut the country’s ability to develop wide swaths of its economy, from semiconductors and supercomputers to surveillance systems and advanced weapons.
The U.S. Commerce Department on Friday unveiled sweeping regulations that limit the sale of semiconductors and chip-making equipment to Chinese customers, striking at the foundation of the country’s efforts to build its own chip industry. The agency also added 31 organizations to its unverified list, including Yangtze Memory Technologies Co. and a subsidiary of leading chip equipment maker Naura Technology Group Co., severely limiting their ability to buy technology from abroad.
The moves are the Biden administration’s most aggressive yet as it tries to stop China from developing technological capabilities it sees as a threat. Depending on how broadly Washington enforces the restrictions, the impact could extend well beyond semiconductors and into industries that rely on high-end computing, from electric vehicles and aerospace to simple gadgets like smartphones.
Chinese state media and officials over the weekend raged against the action, warning of economic consequences and stirring speculation about potential retaliation. He Xiaopeng, the chairman and CEO of Chinese EV maker Xpeng Inc., warned last month that escalating U.S. restrictions on chip exports will set back the nation’s autonomous driving sector.
The two countries are now officially in an “economic war,” Dylan Patel, chief analyst at SemiAnalysis, said. A Chinese analyst said there is “no possibility of reconciliation” any longer.
“This is the U.S. salvo against China’s efforts to build its domestic tech capabilities,” said Patel, who estimates the restrictions could reduce global technology and industry trade by hundreds of billions of dollars. “It’s the U.S. firing back, making clear they will fight back.”
European and Chinese semiconductor stocks tumbled on the news. ASML Holding NV, the most advanced maker of equipment for producing semiconductors, fell more than 3%. Bellwether Semiconductor Manufacturing International Corp. fell as much as 5.2% in Hong Kong on Monday, the most since Aug. 15, as Bloomberg Intelligence analyst Charles Shum slashed his estimate on 2023 growth by 50%. Hua Hong Semiconductor Ltd. plunged 10%, while Shanghai Fudan Microelectronics Group Co. plummeted 25%. Naura fell by its daily limit of 10% in mainland China, the biggest fall since April.
“The rules are a directional signal about U.S. policy on China: a very hawkish consensus is now cemented in place,” wrote Dan Wang, technology analyst at Gavekal Dragonomics.
U.S. officials said the new restrictions are necessary to stop China from becoming more of an economic and military menace. They are seeking to ensure the country’s chipmakers don’t secure the capability to make advanced semiconductors.
China “has poured resources into developing supercomputing capabilities and seeks to become a world leader in artificial intelligence by 2030,” said Assistant Secretary of Commerce for Export Administration Thea D. Rozman Kendler. “It is using these capabilities to monitor, track and surveil their own citizens, and fuel its military modernization.”
Reaction in China was furious. The nationalistic Global Times newspaper warned the “savage attack on free trade” would have dire consequences for the U.S.
“Only arrogant and ignorant people can truly believe that the U.S. can block the development of China’s semiconductor or other technology industries by these illegitimate means,” it said in an editorial. “The U.S. hegemony in science and technology that harms others without benefiting itself may bring some short-term difficulties to China’s semiconductor industry, but will in turn strengthen China’s will and ability to stand on its own in science and technology.”