The US Department of Commerce Strengthens Export Controls on Advanced Computing Semiconductors
The US Department of Commerce’s Bureau of Industry and Security (BIS) has implemented stricter export controls on advanced computing semiconductors, semiconductor manufacturing equipment, and supercomputing items. These controls are targeted at “countries of concern,” including the People’s Republic of China (PRC), in order to protect national security interests and hinder the military modernization efforts pursued by the PRC. The new rules, which build upon previous restrictions, will be effective from November 16, 2023.
New Guidelines for Restricted Advanced Computing Chips
The updated rules modify the parameters that define a restricted advanced computing chip. Under the new guidelines, a chip will face export restrictions if it exceeds either the performance threshold specified in the previous rule or a new “performance density threshold” introduced to prevent potential circumventions. Exporters must also notify the US government of certain chip exports falling just below the restricted threshold.
Exemption for Consumer Applications and Licensing Requirements
The new framework includes an exemption that allows for the export of chips intended for consumer applications. However, a global licensing requirement has been established to prevent circumvention of controls through foreign subsidiaries and branches. This requirement applies to firms headquartered in US arms embargoed countries or Macau.
Red Flags and Due Diligence Mandates
The updates introduce new red flags and due diligence mandates for foundries to identify restricted chip designs originating from countries of concern. Compliance monitoring and enforcement will be strengthened with a presumption of denial for advanced chips and a presumption of approval for other chips exported to 22 nations under a US arms embargo and Macau.
Expanded Controls on Semiconductor Manufacturing Equipment
In addition to advanced computing semiconductors, the BIS has expanded controls on different types of semiconductor manufacturing equipment. US entities are now restricted from aiding advanced PRC semiconductor manufacturing endeavors. The licensing requirements also extend to 21 other countries apart from the PRC and Macau.
Addition to Entity List and Impact on Semiconductor Behemoths
On the same day, two PRC entities and their 13 subsidiaries involved in the development of advanced computing chips detrimental to US national security were added to the Entity List. Foundries manufacturing chips for these listed entities will now require a BIS license. This will have an impact on global semiconductor companies like Nvidia and AMD, as certain chip models that were previously exempt will now fall under the embargo.
Public Commentary and Invitation for Insights
The new rules are open for public commentary for 60 days after publication. The BIS is seeking insights on various aspects, including risks associated with Infrastructure as a Service (IaaS) providers and additional compliance guidance for foundries.
Hot Take: Strengthening Export Controls to Counter China’s Technological Advancements
The US Department of Commerce’s tightened export controls on advanced computing semiconductors reflect the growing concern over China’s military modernization efforts. By imposing stricter regulations, the US aims to protect its national security interests and prevent advanced technologies from falling into the wrong hands. However, these measures may also impact global semiconductor companies that have significant market presence in China. It remains to be seen how these controls will affect the broader semiconductor industry and whether they will effectively curb China’s technological advancements.
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