Exclusive: A new US regulation that exempts select friends from exporting foreign chip equipment to China

 July 31, New York (Reuters) - According to two people with knowledge of the proposal, the Biden administration intends to release a new regulation next month that will increase American authority to halt the transfer of semiconductor manufacturing equipment from specific foreign nations to Chinese chipmakers.

However, the impact of the restriction will be limited by shipments from allies that export essential chipmaking equipment, such as South Korea, Japan, and the Netherlands, according to unnamed individuals who declined to speak to the media.

Therefore, there will be no impact on significant semiconductor equipment manufacturers like Tokyo Electron (8035.T) and ASML (ASML.AS), who both open new tabs. The news caused both firms' shares to soar.
One of the individuals claimed that the restriction, which is an extension of the Foreign Direct Product law, would prevent exports from numerous nations from reaching roughly six Chinese fabrication facilities that are at the core of China's most advanced chipmaking endeavors.

Exports from Taiwan, Malaysia, Singapore, and Israel would all be impacted.

It was unclear to Reuters which Chinese semiconductor factories will be affected.

The U.S. Commerce Department, which is in charge of export regulations, did not respond to a request for comment.

When questioned about the upcoming export control package, Lin Jian, a spokesman for the Chinese foreign ministry, stated that attempts by the United States to "coerce other countries into suppressing China's semiconductor industry" harm everyone and damage international trade

Lin went on to say that China expects relevant nations would thwart US initiatives and protect their own interests in the long run.

"Containment and suppression cannot stop China's development, but will only enhance China's determination and ability to develop its scientific and technological self-reliance," he stated.

The United States imposed export restrictions on semiconductors and chipmaking equipment for China in 2022 and 2023 in an effort to obstruct advances in AI and supercomputing that would be advantageous to the Chinese military.

The proposed regulation, which is presently in draft form, demonstrates how Washington is attempting to maintain pressure on China's rapidly growing semiconductor market without upsetting friends.

According to the Foreign Direct Product Rule, the U.S. government has the authority to prohibit the sale of any product made with technology developed in the United States, even those manufactured abroad.

The Chinese tech giant Huawei (HWT.UL), which reinvented itself after struggling with U.S. constraints and is currently at the forefront of China's advanced chip production and development, has been using the law for several years to keep chips created outside.