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U.S. Lawmakers Urge Stricter Export Controls on Advanced Semiconductors to China

Two senior Republican members of the U.S. House of Representatives have called on the Biden administration to tighten export controls on advanced semiconductors to China. The lawmakers, Michael McCaul and Mike Gallagher, chairmen of the House Foreign Affairs Committee and the House Select Committee on China respectively, expressed concerns over the Department of Commerce’s Bureau of Industry and Security’s (BIS) lax enforcement of existing rules. The call for action comes amid advancements by China’s Semiconductor Manufacturing International Corporation (SMIC) and Huawei Technologies.

On October 6, 2023, Representatives Michael McCaul and Mike Gallagher sent a letter to Jake Sullivan, the National Security Advisor, outlining their concerns about the BIS’s failure to enforce rules set on October 7, 2022. These rules were initially designed to limit the export of advanced semiconductors to China, particularly those that could be used in military applications and human rights abuses.

The lawmakers pointed to recent advancements by SMIC, which they claim have surpassed any current U.S.-based foundry. They also cited the unveiling of Huawei Technologies’ Mate 60 Pro smartphone, which incorporates advanced chips manufactured by SMIC, despite existing U.S. sanctions. According to the letter, “BIS’s lack of resolve has led to SMIC being more advanced than any current U.S.-based foundry.”

The letter outlines four immediate actions that BIS must take:

1. Update and issue final Oct. 7, 2022 Rules to limit workarounds for advanced semiconductor and tool exports to China.

2. Take immediate action against SMIC and Huawei, including full blocking sanctions.

3. Close the Cloud Computing Loophole to prevent Chinese companies from circumventing U.S. export controls.

4. Enforce the 60-Day Rule for moving entities from the Unverified List to the Entity List.

The lawmakers’ call for stricter enforcement of export controls highlights the growing tension between the U.S. and China in the technology sector. It also raises questions about the effectiveness of the U.S. government’s current approach to export controls, especially in light of China’s rapid advancements in semiconductor technology.

The letter also seeks answers to specific questions, including whether there was a unanimous position within the administration to implement the October 7 rules and what intelligence led to a change in Secretary Gina M. Raimondo’s opinion about SMIC and Huawei.

The letter from Representatives McCaul and Gallagher serves as a stark reminder of the challenges the U.S. faces in maintaining technological superiority and national security. It calls for immediate action from BIS to tighten export controls, particularly concerning advanced semiconductors and their potential use in China’s military modernization and human rights abuses.

Reuters: U.S. Aims to Thwart Chinese Access to AI Chips via Overseas Outlets

The Biden administration is contemplating measures to plug a loophole that has been enabling Chinese firms to acquire U.S. artificial intelligence (AI) chips through overseas channels, as reported by Reuters on October 13, 2023. This move underscores Washington’s ongoing effort to curb China’s burgeoning AI capabilities which are significantly anchored on U.S. chip technology.

Last year, the U.S. administration introduced restrictions on the shipment of AI chips and chip-making tools to China, aiming to impede its military advancements. The present consideration to broaden the scope of restrictions reveals the administration’s struggle to sever China’s access to top-notch AI technology amidst the intricacies in sealing every avenue in export controls.

In the initial phase of restrictions, the loophole left open permitted overseas subsidiaries of Chinese companies to have unrestricted access to these semiconductors, thereby, potentially enabling their smuggling into China or remote access by China-based individuals. Notably, chips forbidden by U.S. regulations were reportedly available from vendors in Shenzhen’s Huaqiangbei electronics area as of June.

The loophole’s existence points to the challenge faced by the U.S. in policing transactions involving these chips. While shipping the AI chips to mainland China is against U.S. law, enforcement becomes a hurdle as China-based personnel could lawfully access these chips housed at foreign subsidiaries.

Greg Allen from the Center for Strategic and International Studies highlighted that Chinese firms are procuring chips for overseas data centers, with Singapore emerging as a significant hub for cloud computing.

On the flip side, the Chinese government has previously voiced its discontent over U.S. export controls, accusing Washington of unwarranted suppression of Chinese enterprises.

China’s AI ascendancy is heavily reliant on its access to U.S. chips. A 2022 report by Georgetown University’s Center for Security and Emerging Technology revealed that a substantial portion of AI chips procured through Chinese military tenders were designed by U.S.-based giants like Nvidia, Xilinx, Intel, and Microsemi.

Furthermore, in August, the U.S. urged major chip manufacturers like Nvidia and AMD to limit the shipment of AI chips not only to China but to other regions including certain Middle Eastern countries. The upcoming rules, anticipated to be rolled out this month, are expected to extend these restrictions more broadly across all players in the market.

The Biden administration continues to wrestle with the task of closing loopholes, including the challenge of curtailing Chinese access to U.S. cloud service providers like Amazon Web Services (AWS), which extends similar AI capabilities.

In line with the ongoing U.S. efforts to curb Chinese access to advanced AI chips, as reported by Blockchain.News, senior Republican Representatives Michael McCaul and Mike Gallagher have urged for tighter export control enforcement. On October 6, 2023, they expressed concerns to the National Security Advisor over the Bureau of Industry and Security’s laxity in enforcing existing rules set in 2022 aimed at limiting China’s procurement of advanced semiconductors for military use. This call for stricter enforcement underscores the escalating U.S.-China tech tensions, particularly amidst advancements by China’s Semiconductor Manufacturing International Corporation and Huawei Technologies in semiconductor technology despite current U.S. sanctions.

US Toughens Export Controls on Semiconductors to China Amid Military Concerns

The US Department of Commerce’s Bureau of Industry and Security (BIS) unveiled tightened export controls on advanced computing semiconductors, semiconductor manufacturing equipment, and supercomputing items to nations deemed as “countries of concern”, including the People’s Republic of China (PRC) on October 17, 2023. This move aims to thwart the military modernization efforts pursued by the PRC, in a bid to shield national security interests. The latest raft of rules builds upon the initial restrictions enacted on October 7, 2022.

The BIS’s updated rules, effective November 16, 2023, augment the previously established controls by modifying the parameters that define a restricted advanced computing chip. Under the new guidelines, a chip will face export restrictions if it exceeds either of two delineated parameters: the performance threshold specified in the previous rule or a new “performance density threshold” introduced to preempt potential circumventions.

Additionally, the US government will assess certain chip exports falling just below the restricted threshold, following a mandatory notification by the exporters. This new framework also carves out an exemption, permitting the export of chips aimed at consumer applications.

A global licensing requirement for exporting controlled chips to any firm headquartered in a US arms embargoed country or Macau has been established to curb circumvention of the controls through foreign subsidiaries and branches. The updates also introduce new red flags and due diligence mandates for foundries to identify restricted chip designs emanating from countries of concern.

The licensing requisites extend to 22 nations under a US arms embargo and Macau, with a presumption of denial for advanced chips and a presumption of approval for other chips, bolstering the visibility for compliance monitoring and enforcement.

Parallelly, the BIS has expanded controls on different types of semiconductor manufacturing equipment and refined US persons restrictions to ensure US entities do not aid advanced PRC semiconductor manufacturing endeavors. The licensing requirements now encompass 21 other countries apart from the PRC and Macau.

On the same day, two PRC entities and their 13 subsidiaries, identified as being involved in the development of advanced computing chips detrimental to US national security and foreign policy interests, were added to the Entity List. Foundries manufacturing chips for these listed entities now require a BIS license.

Notably, the amplified restrictions will impact global semiconductor behemoths like Nvidia and AMD, whose certain chip models previously exempt, will now fall under the embargo. This is particularly significant given China’s position as a major market for these firms.

The rules are open for public commentary for 60 days post-publication, inviting insights on several facets including risks associated with Infrastructure as a Service (IaaS) providers, and additional compliance guidance for foundries.