# Exclusive: Biden to hit China with broader curbs on U.S. chip and tool exports
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-09-12
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Biden Administration Plans to Broaden Curbs on
Meta Description: Discover how restrictions on semiconductors and chipmaking tools will impact AI and technology exports to China, with potential implications for US companies.
URL: https://financedigest.com/exclusive-biden-to-hit-china-with-broader-curbs-on-u-s-chip-and-tool-exportshtml

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By Karen Freifeld and Alexandra Alper

WASHINGTON(Reuters) – The Biden administration plans next month to broaden curbs on U.S shipments to China of semiconductors used for artificial intelligence and chipmaking tools, several people familiar with the matter said.

The Commerce Department intends to [publish new regulations based on restrictions communicated](https://www.financedigest.com/opus-trust-marketing-publishes-a-report-to-offer-insightinto-the-changing-face-of-customer-communications.html "Opus Trust Marketing publishes a report to offer insight into the changing face of customer communications") in letters earlier this year to three U.S. companies — KLA Corp, Lam Research Corp and Applied Materials Inc, the people said, speaking on the condition of anonymity. The [plan for new rules](https://www.financedigest.com/britain-plans-new-data-rules-to-ease-compliance-burden.html "Britain plans new data rules to ease compliance burden") has not been previously reported.

The letters, which the companies publicly acknowledged, forbade them from [exporting chipmaking equipment to Chinese factories that produce advanced semiconductors](https://www.financedigest.com/dutch-responds-to-us-china-policy-with-a-plan-to-curb-semiconductor-tech-exports.html "Dutch responds to US China policy with a plan to curb semiconductor tech exports") with sub-14 nanometer processes unless the sellers obtain Commerce Department licenses.

The rules would also codify restrictions in Commerce Department letters sent to Nvidia Corp and Advanced Micro Devices last month instructing them to halt shipments of several [artificial intelligence](https://www.financedigest.com/types-of-artificial-intelligence.html "Types of artificial intelligence") computing chips to China unless they obtain licenses.

Some of the [sources said the regulations would likely include additional actions against China](https://www.financedigest.com/exclusive-foxconn-woes-could-hit-at-least-30-of-iphone-nov-shipments-from-china-plant-source.html "Exclusive: Foxconn woes could hit at least 30% of iPhone Nov shipments from China plant – source"). The restrictions could also be [changed and the rules](https://www.financedigest.com/uk-watchdog-warns-crypto-firms-to-prepare-for-advertising-rule-change.html "UK watchdog warns crypto firms to prepare for advertising rule change") published later than expected.

So-called “is informed” letters allow the Commerce Department to bypass lengthy rule-writing [processes to put controls](https://www.financedigest.com/sdl-helps-lifeplus-engage-with-customers-across-50-countries-and-gain-control-of-translation-costs-and-processes.html "SDL Helps Lifeplus Engage with Customers across 50 Countries and Gain Control of Translation Costs and Processes") in place quickly, but the letters only apply to the companies that receive them.

Turning the letters into rules would broaden their reach and could subject other U.S. [companies producing similar technology](https://www.financedigest.com/kelda-technology-selected-as-one-of-thetop-30-cleantech-companies-in-the-world.html "Kelda Technology selected as one of thetop 30 cleantech companies in the world") to the restrictions. The regulations could potentially apply to companies trying to challenge [Nvidia and AMD’s dominance in artificial intelligence chips](https://www.financedigest.com/nvidia-shows-new-research-on-using-ai-to-improve-chip-designs.html "Nvidia shows new research on using AI to improve chip designs").

Intel Corp and startups like Cerebras [Systems are targeting the same advanced computing markets](https://www.financedigest.com/the-hemodynamic-monitoring-systems-market-to-clamber-on-the-shoulders-of-innovation.html "The Hemodynamic Monitoring Systems Market To Clamber On The Shoulders Of Innovation"). Intel said it is closely monitoring the situation, while Cerebras declined to comment.

One source said the [rules could also impose license requirements on shipments to China](https://www.financedigest.com/wall-st-stocks-fall-bond-yields-rise-as-china-drops-quarantine-rule.html "Wall St stocks fall, bond yields rise as China drops quarantine rule") of products that contain the targeted chips. Dell Technologies, Hewlett Packard [Enterprise and Super Micro Computer](https://www.financedigest.com/enterprise-training-and-the-future-of-cloud-computing.html "Enterprise Training and the Future of Cloud Computing") make data center servers that contain Nvidia’s A100 chip.

Dell and HPE said they were monitoring the situation, while Super Micro Computer did not respond to a request for comment.

A senior Commerce official declined to comment on the upcoming action, but said: “As a general rule, we look to codify any restrictions that are in is-informed letters with a regulatory change.”

A spokesperson for the Commerce Department on Friday declined to comment on specific [regulations but reiterated that it is “taking a comprehensive approach to implement additional actions…to protect](https://www.financedigest.com/aon-introduces-new-cyber-solution-in-response-to-eu-regulation-on-data-protection.html "Aon introduces new cyber solution in response to EU regulation on data protection") U.S. national security and [foreign policy interests,” including to keep China](https://www.financedigest.com/first-foreign-covid-vaccines-head-to-china-from-germany.html "First foreign COVID vaccines head to China from Germany") from acquiring U.S. [technology applicable to military modernization](https://www.financedigest.com/how-is-modern-technology-shaping-our-in-store-experience.html "How Is Modern Technology Shaping Our In Store Experience?").

KLA, Applied Materials and Nvidia declined to comment while Lam did not respond to requests for comment. AMD did not comment on the specific policy move but reaffirmed it does not foresee a “material impact” from its new licensing requirement.

‘CHOKE POINT’

The planned action comes as the President Joe Biden’s administration has sought to thwart [China’s advances](https://www.financedigest.com/stocks-advance-u-s-dollar-retreats-as-china-drops-quarantine-rule.html "Stocks advance, U.S. dollar retreats as China drops quarantine rule") by targeting technologies where the United States still maintains dominance.

The strategy is to choke off [China and they have discovered that chips](https://www.financedigest.com/biden-signs-bill-to-boost-u-s-chips-compete-with-china.html "Biden signs bill to boost U.S. chips, compete with China") are a choke point. They can’t make this stuff, they can’t make the manufacturing equipment,” said Jim Lewis a [technology expert](https://www.financedigest.com/from-the-experts-5-payment-technology-trends-to-look-out-for-in-2016.html "FROM THE EXPERTS: 5 PAYMENT TECHNOLOGY TRENDS TO LOOK OUT FOR IN 2016") at the Center for Strategic and International Studies. “That will change.”

In an update on China-related [measures last week](https://www.financedigest.com/eu-countries-eye-deal-on-more-energy-measures-within-weeks.html "EU countries eye deal on more energy measures within weeks"), the Chamber of Commerce, a U.S. business lobbying group, [warned members of imminent](https://www.financedigest.com/stocks-extend-sell-off-as-u-s-warns-of-imminent-russian-invasion-of-ukraine.html "Stocks extend sell-off as U.S. warns of imminent Russian invasion of Ukraine") restrictions on AI chips and chipmaking tools.

We are now hearing that members should expect a series of rules or perhaps an overarching rule prior to the mid-term election to codify the guidance in recently issued (Commerce Department) ‘is-informed’ letters to chip equipment and chip [design companies,”](https://www.financedigest.com/mastering-the-2016-company-logo-design-trend.html "Mastering The 2016 Company Logo Design Trend") the chamber said.

The group also said the agency [plans to add additional Chinese supercomputing entities to a trade](https://www.financedigest.com/industrialist-sanjeev-gupta-plans-second-bank-to-aid-uks-trade-with-commonwealth-markets.html "Industrialist Sanjeev Gupta plans second bank to aid UK’s trade with Commonwealth markets") blacklist.

Reuters was first to report in July that the Biden administration was [actively discussing banning exports of chipmaking tools to Chinese factories](https://www.financedigest.com/asias-factory-activity-contracts-despite-chinas-covid-reopening.html "Asia’s factory activity contracts despite China’s COVID reopening") that make advanced semiconductors at the 14 nanometer node and smaller.

U.S. officials have reached out to allies to lobby them to enact similar policies so that foreign [companies would not be able to sell technology to China](https://www.financedigest.com/companies-in-china-distance-themselves-from-taiwan-amid-pelosi-backlash.html "Companies in China distance themselves from Taiwan amid Pelosi backlash") that American firms would be barred from shipping, two of the sources said.

“Coordination with allies is key to maximizing effectiveness and minimizing unintended consequences,” Clete Willems, a [former Trump administration trade official](https://www.financedigest.com/italy-names-former-treasury-official-to-head-ita-airways.html "Italy names former Treasury official to head ITA Airways") said. “This should favor broader regulations that others can replicate instead of one-off ‘is informed’ letters.”

(Reporting by Karen Freifeld and Alexandra Alper; Additional Reporting by Stephen Nellis and Jane Lanhee Lee; Editing by Chris Sanders and Cynthia Osterman)


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