U.S. Expands Export Controls on Chinese Tech Companies

In a recent move, the U.S. Commerce Department has broadened its export controls by adding numerous Chinese technology firms to its list, particularly those involved in producing equipment essential for computer chip manufacturing, chip-making tools, and relevant software.

This latest expansion includes 140 firms that are primarily located in China. However, it also affects some Chinese-owned companies operating in Japan, South Korea, and Singapore.

The updated regulations were announced on Monday and will be published in the upcoming issue of the U.S. Federal Register. These regulations also impose restrictions on the exportation of high-bandwidth memory chips to China, which are crucial for handling vast amounts of data in sophisticated applications including artificial intelligence.

In response, China’s Commerce Ministry expressed its discontent, stating it would take measures to safeguard its "rights and interests," although specific details of these actions were not disclosed. The ministry characterized these new measures as a typical instance of "economic coercion" and a non-market practice.

U.S. Commerce Secretary Gina Raimondo articulated that the aim of this new policy is to hinder China's ability to access advanced technologies that could threaten U.S. national security.

Being listed on the "entity list" means that U.S. companies will likely face denials for export licenses when attempting to engage with these newly identified companies.

The Biden administration has been steadily increasing the number of companies subjected to such export controls whilst promoting investment and production of semiconductors within the U.S.

Matthew S. Axelrod, the assistant secretary for export enforcement, noted, "The purpose of these Entity List actions is to stop PRC (People’s Republic of China) companies from leveraging U.S. technology to locally produce advanced semiconductors." He added that adding key semiconductor fabrication facilities, equipment manufacturers, and investment firms to this list aims to directly obstruct China's military modernization efforts, weapons of mass destruction programs, and human rights violations.

China has responded by accusing the U.S. of striving for "technology hegemony," increasing pressure on major Chinese tech companies such as Huawei by restricting their access to American suppliers.

China particularly objects to what it considers "long-arm jurisdiction" measures, which involve extending U.S. export controls to companies such as chip-making equipment manufacturers in South Korea, Taiwan, and Singapore, provided they utilize any U.S. technology that may be sold to China.

As a result of this pressure from Washington, China is ramping up its initiatives to develop its own advanced computer chips and technologies, backing its industry with billions in subsidies and investments. Although Chinese manufacturers have made rapid advancements, they still lag behind in certain areas.

The shares of Japanese companies involved in computer chip production and related equipment saw significant increases following these developments. Testing equipment maker Applied Materials rose by 4.9%, while Tokyo Electron and Advantest witnessed gains of 4.6%. Another chipmaker, Disco Corp., increased by 6.9%, complementing a 2.3% rise in the Tokyo benchmark Nikkei 225 stock index.

Conversely, shares of Beijing’s Naura Technology Group, which was added to the new list, dropped by 3%, and fellow chipmaker Piotech Inc. lost 5.3% in value.

export, technology, China