The U.S. Commerce Department has intensified its crackdown on China’s tech industry by adding 140 Chinese firms to its “entity list.” This expanded list includes companies involved in semiconductor manufacturing, chipmaking tools, and software, with nearly all based in China. A few are Chinese-owned businesses operating in Japan, South Korea, and Singapore.
The move aims to restrict China’s access to crucial technology, including high-bandwidth memory chips. These chips are key to AI and other data-heavy applications. Additionally, the new restrictions cover 24 types of chipmaking tools and three software tools, as well as equipment produced in countries like Singapore and Malaysia.
New Regulations and Impact on Trade
These revised rules were posted on the U.S. Federal Register’s website and are set to be published soon. Under the new regulations, U.S. companies must secure special licenses to export to the listed firms, a process that frequently leads to rejections. The export restrictions primarily focus on high-bandwidth memory chips, essential for handling massive data flows in AI systems.
Some of the prominent companies now facing these restrictions include Swaysure Technology Co., Si’En Qingdao, and Shenzhen Pensun Technology Co., which have ties to the Chinese tech giant Huawei. Huawei, already heavily impacted by previous U.S. sanctions, plays a critical role in China’s push to develop advanced semiconductor technology.
China’s Response and Criticism
China quickly condemned the U.S. decision. A spokesperson from the Chinese Foreign Ministry, Lin Jian, argued that the measures disrupted global trade and undermined international economic norms. Lin also stated that China would take steps to protect the interests of its businesses, though specific actions were not disclosed.
The Chinese Ministry of Commerce described the U.S. actions as “economic coercion” and “non-market practices.” In response, the ministry emphasized that it would take appropriate countermeasures to safeguard China’s rights.
U.S. Justifies the New Restrictions
Commerce Secretary Gina Raimondo defended the U.S. action, citing national security concerns. According to Matthew Axelrod, the Assistant Secretary for Export Enforcement, the U.S. aims to prevent China from using American technology to produce advanced semiconductors.
Axelrod explained that the U.S. restrictions are designed to impede China’s military modernization, weapons programs, and human rights abuses by limiting access to critical technology. The Biden administration has built upon measures introduced under the Trump administration, furthering the goal of increasing domestic semiconductor production while curbing China’s technological advances.
Tensions Over “Long-Arm Jurisdiction”
China has long accused the U.S. of seeking “technology hegemony” through “long-arm jurisdiction,” applying U.S. laws beyond its borders. The new export restrictions have escalated these tensions, extending to companies in South Korea, Taiwan, and Singapore that use U.S. technology, thus preventing them from supplying China.
This expansion of controls has pushed China to accelerate its own semiconductor development. The Chinese government has invested heavily in its tech sector, providing billions of dollars in subsidies. While progress has been made, Chinese manufacturers remain behind global leaders in some key areas of technology.
Global Market Reactions
The announcement of the export restrictions has had immediate effects on the global stock market. Shares of Japanese chipmakers surged, with Advantest and Tokyo Electron both rising by 4.6%, and Applied Materials up 4.9%. Semiconductor company Disco Corp. also saw a 6.9% jump in its stock price.
On the other hand, Chinese firms affected by the restrictions saw significant losses. Naura Technology Group’s stock dropped 3%, while Piotech Inc. lost 5.3%.
