# New China Export Restrictions: A Double-Edged Blade for US Chip Manufacturers and Partners
The Biden administration has rolled out a new set of export restrictions targeting China’s access to cutting-edge semiconductor technology, specifically high-bandwidth memory (HBM) chips that are vital for artificial intelligence (AI) applications. Although these initiatives are crafted to impede China’s technological growth, they may unintentionally have a greater negative impact on US chip manufacturers and allied countries than on their intended target, Huawei, a leading tech firm in China.
## The New Export Restrictions: What’s Different?
On December 2, 2024, the United States government unveiled a list of limitations aimed at China’s semiconductor sector. These actions encompass:
1. **HBM Chips for AI Use**: The export of sophisticated HBM chips, critical for AI innovation, has been curtailed.
2. **Chip Fabrication Tools and Software**: A total of 24 chip fabrication tools and three software applications have been added to the restricted category.
3. **Foreign Products Including US Parts**: Any foreign-produced items with even a single US-manufactured chip will now fall under these constraints.
4. **Entity List Extension**: More than 100 Chinese chip manufacturing tool companies, two investment firms, and nearly 20 semiconductor firms have been included in the US Entity List, necessitating special permits for accessing US technology—permits that are seldom granted by the US.
These actions aim to obstruct China from enhancing its domestic semiconductor manufacturing capacity, which plays a crucial role in modernizing its military and AI frameworks.
## The Effects on US and Allied Firms
While the intended purpose of the restrictions is to hinder China’s technological advancement, they also create significant hurdles for US and allied firms. Major affected entities likely include:
– **US Companies**: Lam Research, KLA, and Applied Materials, all of which provide chip fabrication tools and materials, are projected to experience a revenue decrease from their Chinese clients.
– **Allied Nations**: The Dutch firm ASM International and South Korea’s Samsung are among the non-US companies likely to encounter disturbances. Samsung, in particular, depends on China for 30% of its HBM chip sales, making it particularly susceptible to these new measures.
The consequences could extend to other countries engaged in the global semiconductor supply chain, including Singapore and Malaysia, which manufacture chipmaking tools utilizing US technology.
## Loopholes and Constraints: A Policy Under Review
In spite of the Biden administration’s goals, analysts and industry specialists have voiced concerns regarding the effectiveness of these new restrictions. Among the critiques:
1. **China’s Preparations**: Reports suggest that China had ample time to align with these constraints, accumulating the now-restricted technologies. For example, Applied Materials experienced an 86% surge in net revenue from products delivered to China in the nine months prior to July 2024.
2. **Implementation Gaps**: The restrictions neglect to blacklist particular companies that Huawei and other Chinese firms depend on, such as ChangXin Memory Technologies Inc., a leading memory chip manufacturer in China. Additionally, older iterations of HBM chips and certain chip-making machinery remain accessible to China.
3. **Confused Messaging**: Gregory Allen, director at the Wadhwani AI Center at the Center for Strategic and International Studies, criticized the policy for its incoherence. “You incur almost all of the costs of the policy with only a fraction of the benefits,” he remarked, highlighting the loopholes and slow rollout.
## China’s Reaction: Defiance and Retaliation
China has vehemently denounced the new export restrictions, accusing the US of misusing its authority and infringing upon international trade regulations. Chinese foreign ministry spokesperson Lin Jian stated that the measures disrupt global supply chains and promised that China would take actions to protect the interests of its businesses.
China’s retaliation could involve countermeasures, such as limiting exports of rare earth minerals vital for semiconductor production or intensifying its initiatives for technological independence.
## The Political Scenario: Continuity with Trump?
As the US prepares for a new administration under President-elect Donald Trump, the future of US-China relations remains unpredictable. Trump, who initiated the US-China trade conflict during his previous presidency, is anticipated to uphold a hardline approach toward China. His recent proposition for a 35% tariff on all Chinese goods indicates that trade tensions may escalate further.
Nonetheless, Trump’s execution of this strategy might differ. His choice for national security adviser, Michael Waltz, has supported reshoring vital supply chains, paralleling some of Biden’s strategies. However, the influence of individuals like Elon Musk, who has considerable business interests in China, could add an unpredictable element to US-China trade dynamics.
## The Broader Context: Risks and Possibilities
The recent export restrictions underscore the intricacies of reconciling national security concerns with economic realities. While the US seeks to maintain its technological supremacy and thwart China from advancing its AI capabilities, the policy threatens to alienate key allies and inflict damage on domestic companies.
In addition, the global semiconductor industry is profoundly interconnected,
