In the year 2024, the US government continued its comprehensive chip control measures against the Chinese Communist Party (CCP) that started in October 2022. After over two years of refinement, these tools have become more precise and clear, widening the gap between CCP-dominated chip industry and international advanced levels. Chinese tech giant Huawei has been greatly impacted by the successive waves of sanctions in the US.
On December 2, the US Department of Commerce’s Bureau of Industry and Security (BIS) announced new export control measures against China, including controls on 24 types of chip manufacturing equipment, three software tools used for chip development, and high-bandwidth memory chips. Additionally, 140 companies were added to the Entity List.
BIS had two main objectives: to slow down CCP’s development of artificial intelligence (AI) and to disrupt CCP’s chip development ecosystem.
In October 2022, the US first imposed export controls on CCP chips, considered the biggest shift in US-China tech policy since the 1990s. Updated in October 2023, this was the third major upgrade of these measures.
What sets this apart from past sanctions is the emphasis on chip manufacturing equipment. The scope of sanctions is broader, covering areas such as photolithography, etching, thin film deposition, cleaning, ion implantation, CMP, and packaging testing equipment.
Companies in mainland China related to chip materials, chip design software (EDA), chip companies, chip investment companies, and overseas companies related to Chinese companies are also included in the sanctions list.
These new sanctions could truly hinder CCP’s efforts to build a domestic chip manufacturing industry. If Chinese tool manufacturers cannot access these tools at any time, rebuilding a completely localized supply chain will become more difficult and expensive.
On October 28, the US Treasury Department issued final rules on investment in China, aiming to prevent US investment from enabling technology development that could threaten national security in fields such as chips, AI, and quantum computing.
The rules will take effect on January 2, 2025, and will prohibit certain transactions in the fields of chips, microelectronics, and AI.
These rules stem from an executive order issued by President Biden in August last year. On June 21 this year, the US Treasury Department drafted regulations based on this order.
The rules apply to companies and individuals doing business in mainland China, Hong Kong, and Macau. The transactions covered are not limited to physical transfers of finished products but also include various non-material benefits such as elevation of status and reputation, management assistance, investment and talent networks, market access, and access to additional financing.
Since the investing party typically offers more than just funds, but also broader non-material benefits, the impact of the rules on investing in Chinese tech companies will be much more significant than just reducing funds; the losses will be substantial.
The Biden administration seems more willing to invest in allied countries. In October 2024, India announced a significant chip cooperation agreement with the US, establishing a chip factory in the eastern city of Kolkata, seen as a crucial step in countering CCP influence in the global tech supply chain.
In addition to the US executive branch, the US Congress, as the legislative and oversight branch, is also stepping up efforts in chip control as a legislative and oversight focus.
During the “China Week” legislative action launched by the US House of Representatives in September, up to 28 bills related to China were deliberated, at least four focusing on tightening export controls, including:
– Export Control Enforcement Enhancement Act (H.R. 7151), which expands proposal authority and streamlines decision-making processes. The Department of Defense, State Department, and others can directly add specific entities to the list according to their respective expertise.
– Defense of American Superiority and Improvement of Export Control Transparency Act (H.R. 6614), requiring the Secretary of Commerce to submit detailed reports to relevant congressional committees every 90 days.
– Sanctions List Coordination Act (H.R. 5613), aiming to enhance coordination and consistency among different sanction lists.
– Remote Access Security Act (H.R. 8152), aiming to include “remote access” in the US export control system, an important expansion of the existing export control system.
On July 25, the US Senate held a hearing on “Promoting National Security through Export Controls, Investment Security, and the National Defense Authorization Act.” Lawmakers called for more actions to prevent advanced semiconductor chips from being illegally shipped to China through networks.
Another focus of this year’s crackdown measures is to prevent the CCP from using global free trade to evade US bans through smuggling, shell companies, third-country redirecting, and other illicit channels.
In August this year, The Information reported that a Chinese electronics company purchased several hundred servers containing around 2400 high-end Nvidia chips from a middleman in Malaysia for $120 million. Similar information has continued to emerge.
On September 5, the US Department of Commerce’s Bureau of Industry and Security (BIS) introduced a new interim final rule, imposing export controls on quantum computing products, advanced chip manufacturing equipment, and more.
The control measures from October 2022 and October 2023 focused on the product side. The new rules strengthen alignment with allies to focus on the distribution side.
The latest rule introduces a new concept of “global control.” While not explicitly mentioning China, exporting or re-exporting these items to China (and other countries) will require licenses, with license applications subject to a “presumption of denial” review.
Moreover, the new rule adds 18 export control classification numbers and updates nine existing ones, allowing the US to stay in sync with other countries.
The day after the new rules were introduced, on September 6, the Dutch government stated it would expand export permit requirements for ASML’s 1970i and 1980i deep ultraviolet (DUV) immersion lithography machines, which are mid-range machines that can be used to produce more advanced processes.
To prevent similar loopholes, The Wall Street Journal revealed that the Biden administration may introduce a new round of restriction measures later in December to limit the export of artificial intelligence chips used in large computing facilities to certain countries in Southeast Asia and the Middle East.
With the popularity of ChatGpt in 2023, AI chips have become a focal point in the US-China chip war. Despite the BIS upgrade in October 2023 mainly targeting China’s high-performance computing areas like artificial intelligence, most consumer chips used in laptops, smartphones, and gaming were exempted.
On March 29, 2024, BIS updated the rules once again to prevent the CCP from acquiring US AI chips and chip manufacturing equipment. In the new rule, export control also applies to laptops containing relevant chips.
To circumvent US chip bans, Chinese companies and the CCP military have also been training their AI models using cloud service providers like Amazon and Microsoft.
In response, the US government rolled out targeted actions. In January 2024, the Biden administration proposed that cloud service providers like Amazon and Microsoft disclose the names and IP addresses of foreign clients to prevent the CCP from exploiting these US platforms.
Following the announcement of new US sanctions, the CCP’s Ministry of Foreign Affairs strongly responded on December 2. On December 3, the CCP’s Ministry of Commerce completely banned the sale of gallium, germanium, antimony, and other materials to the US, crucial for chip production.
On December 9, CCP authorities launched an antitrust investigation into Nvidia, the world’s largest AI chip manufacturer. Sources disclosed that Chinese manufacturers recently started limiting sales of key components for manufacturing drones to the US and Europe.
On August 1 last year, Beijing announced export controls on two metals, gallium and germanium. Analysts suggest that while retaliation measures may cause some discomfort for Washington, the diminishing returns for China will only push the US to seek other sources or enhance its own development.
The Center for Strategic and International Studies (CSIS) in Washington stated that earlier restrictions by China on certain minerals from the US have already caused a significant decrease in exports, making their retaliation largely symbolic rather than practical.
In implementing chip control measures against the CCP, Huawei, a company deeply connected to the CCP, has become a benchmark and front line in the US-China tech war. Its products to some extent represent the CCP’s notion of tech innovation and independence, which has triggered a new round of sanctions from the US.
In August 2023, Huawei launched its flagship 5G phone, the Mate 60 Pro, equipped with 7nm Kirin 9000s advanced chips manufactured by SMIC. However, it quickly faced backlash from the US, with the Commerce Department sending dozens of letters to US suppliers of SMIC, suspending licenses to sell products to the company.
In September this year, the US and the Netherlands restricted exports of old-model deep ultraviolet lithography machines 1970i and 1980i, machines that can achieve advanced process capabilities.
In April, Huawei introduced the MateBook X Pro laptop featuring the Intel Core Ultra 9 processor, which angered US legislators.
Under pressure from US lawmakers, on May 7, the US Commerce Department confirmed the withdrawal of export licenses to Huawei, preventing Intel and Qualcomm from selling chips for smartphones and notebooks to Huawei.
In June, Huawei announced the availability of samples of its Ascend 910C processor, aiming to compete with Nvidia’s H100 AI chip. In October, Huawei’s AI accelerator Ascend 910B, found to use TSMC’s 7nm chip, led to TSMC halting sales of AI application 7nm chips to mainland customers on November 11. Two days later, the US called upon Samsung, Intel, and others to follow suit.
The CCP has long advocated for chip self-sufficiency and invested heavily, but it has not achieved chip independence; instead, the gap with international advanced levels has widened.
Many experts believe that the Biden administration’s policies are slowing down CCP’s chip industry development. Kevin Klyman, a researcher at Harvard University’s Technology Policy Center, believes that the Biden administration’s measures have already impacted the overall tech development of the CCP.
On April 18, Huawei launched the Pura 70 series phones. According to two companies that disassembled the Pura 70 Pro for Reuters, the 7nm Kirin 9010 chip shows that China’s chip manufacturing capability has indeed slowed down.
On December 11, TechInsights released a new report. Researchers who dissected Huawei’s latest Mate 70 Pro Plus found that the Kirin 9020 uses the same 7nm technology as the previous year, echoing TechInsights analyst Alexandra Noguera’s views that Huawei’s current chip technology lags behind Taiwan Semiconductor Manufacturing Company’s (TSMC) 7nm chip from 2019, resulting in slower speed, higher power consumption, and lower yields.
Author Miller of the book “Chip Wars” pointed out that Huawei’s latest phones use a process pioneered by TSMC in 2018. While being technologically lagging by 5 to 6 years might not sound like much, the computational power is about 3 times behind.
Christophe Fouquet, CEO of ASML in the Netherlands, stated in an interview in August that China’s semiconductor process technology still lags behind the US by 10 years. When asked about the possibility of China mimicking to produce advanced extreme ultraviolet (EUV) machines, he believed the probability was very low.
In December 2024, The Wall Street Journal disclosed that the Biden administration may introduce a new round of restriction measures later in December to limit the export of artificial intelligence chips used in large computing facilities to certain countries in Southeast Asia and the Middle East.
On December 2, 2024, the US Department of Commerce’s Bureau of Industry and Security (BIS) announced new export control measures against China, including controls on 24 types of chip manufacturing equipment, three software tools used for chip development, and high-bandwidth memory chips.
On October 28, 2024, the US Treasury Department issued final rules on investment in China, aiming to prevent US investment from enabling technology development that could threaten national security in fields such as chips, AI, and quantum computing.
On September 6, 2024, the Dutch government stated it would expand export permit requirements for ASML’s 1970i and 1980i deep ultraviolet (DUV) immersion lithography machines.
On September 5, 2024, the US Department of Commerce’s Bureau of Industry and Security (BIS) introduced a new interim final rule, imposing export controls on quantum computing products, advanced chip manufacturing equipment, and high-energy laser amplifiers, effectively targeting key technologies that the CCP pursues.
On June 21, 2024, the US Treasury Department issued regulations to curb US investment in sensitive technology sectors in China. The draft regulations would prohibit or review US investments in Chinese chips and microelectronics, quantum information technology, and artificial intelligence.
On May 14, 2024, following a 301 review, the US escalated tariffs on Chinese electric vehicles, solar panels, and chips.
On March 29, 2024, the Biden administration revised regulations to prevent the CCP from acquiring US AI chips and chip manufacturing equipment. These export controls now also apply to laptops containing relevant chips.
In January 2024, the Biden administration proposed that cloud service providers like Amazon and Microsoft disclose the names and IP addresses of foreign clients to prevent CCP exploitation of these platforms.
On October 17, 2023, the Biden administration stepped up export controls on advanced artificial intelligence chips. Nvidia tailored the A800 and H800 chips for the Chinese market. Intel’s Gaudi2 special AI chip sales in China will cease. The new rules will also limit chips beyond a certain “performance density” level to prevent Chinese companies from illegally stacking small chips (chiplets) into oversized chips. Thirteen entities “engaged in advanced computing chip development,” including entities like Biren Technologies and Moore Threads and their mainland subsidiaries, were added to the Entity List.
On September 5, 2023, the Dutch government announced a decision to require export permits from the government for ASML’s 2000i DUV and more advanced types of deep ultraviolet lithography systems sold to China starting on September 1.
On March 31, 2023, the Japanese government announced new measures to expand export restrictions on 23 types of advanced chip manufacturing equipment.
In February 2023, to further curb China’s chip capabilities, the Biden administration persuaded allies such as the Netherlands and Japan to take restrictions.
In December 2022, the US listed chipmakers like YMTC and dozens of other Chinese companies on the trade blacklist.
In October 2022, the Biden administration unveiled a series of comprehensive export control measures against the CCP to prevent the acquisition and development of advanced computational semiconductor chips, supercomputing systems with such chips, and semiconductor manufacturing equipment, as well as to limit “Americans” from supporting “in China semiconductor manufacturing facilities” “developing”/”producing” specific integrated circuits.
In September 2022, the US asked chipmakers Nvidia and AMD to halt exports of top-level computing chips used for artificial intelligence work to China.
In August 2022, the CHIPS and Science Act, signed into law by President Biden, allocated over $52 billion for semiconductor research to promote US semiconductor research and manufacturing as a countermeasure against the CCP.
In August 2022, the Trump administration imposed an export ban on GAA technology EDA to China, limiting CCP’s development of next-generation sub-3nm process chip technology.
In May 2020, the Trump administration prevented global chip manufacturers from shipping chips to Huawei, leading to the paralysis of Hisilicon chips and the smartphone department.
In October 2018, after the US Department of Justice indicted for theft of trade secrets, the Trump administration cut off contact between Chinese chip manufacturer Fujian Jinhua Integrated Circuit and its US suppliers.
Since 2018, the Trump administration has begun preventing the Netherlands from selling chip manufacturing technology to China, preventing ASML from selling its most advanced EUV lithography machines to Chinese customers.