Biden Plans to Limit China’s Chip Production

The Biden Administration plans to introduce new, ultra-strict restrictions severely limiting China’s chip production and supercomputing. These measures will affect China’s chip production and advanced computing, which are critical to China’s military development. Supercomputing is necessary for developing nuclear weapons, encryption technology, missile defence and other systems. This could be the US government’s most significant effort to limit China’s military technology development.

The Washington Post and The New York Times reported that the rules, which will be announced as early as this week, will strike more broadly than the rigid export controls previously imposed on Chinese tech giant Huawei.

The New Rules

The Washington Post, citing people familiar with the matter, said that using the Foreign Direct product Rules (FDPR) would prevent companies anywhere in the world, without permission from the US government, from selling specific advanced computing chips to Chinese buyers if the company uses the US technology to make chips. People familiar with the matter were briefed on the measure and participated in discussions, but plans have not yet been announced.

The new rules will apply to chips used in supercomputers and specific artificial intelligence applications, the report said. In addition, the US government is restricting exports to China of chip-making tools needed to make advanced semiconductors of 14 nanometers or smaller. It also plans to put more Chinese organisations on an “entity list” that would ban the export of chips.

The Biden administration has signalled its intention to use more power to curb Beijing’s efforts to use technology to gain a global advantage, both militarily and economically. Past restrictions did not address using the Foreign Direct Product Rules (FDPR), a particularly tough trade measure because it applies to sellers outside the United States. Because there is hardly a chip in the world that was not made with American tools or designed with software that originated in the United States. Therefore, the impact of the new regulations can be imagined.

The Importance of Chips

In the past, when the US used FDPR provisions to restrict Huawei’s chip purchases, it crippled Huawei’s production and sales. The US also used the FDPR to block companies around the world from selling specific chips to Russian buyers after Russia invaded Ukraine, the ban, US officials say, is depriving the Russian military of vital components.

Chinese companies, government research labs and other entities are expected to face restrictions similar to Huawei’s, The New York Times said, citing two people familiar with the matter. Experts noted that Washington also plans to limit the sale of US-made powerful China’s most potent supercomputing and data centre projects. Such restrictions could ultimately inhibit the ability of major academic institutions and Internet companies such as Alibaba and Tencent to obtain the components they need to build leading data centres and supercomputers.

Over time, as supercomputer performance levels increase, the rule could severely limit Beijing’s ability to develop powerful digital computing technology. This technology is the cornerstone of innovation in various fields, including biological sciences, artificial intelligence, and missile engineering.

The report said that the Biden administration had faced some criticism that it has been slow to curb China’s access to cutting-edge US technology. For many government officials, Beijing’s recent progress in clearing a critical technological hurdle in chip manufacturing underscores the urgent need for broader US regulation of the industry, people familiar with the discussions said.