In the ongoing US-China trade negotiations, the issue of imposing further restrictions on technology products exported to China has become a pivotal point. Particularly, limitations on semiconductor chip manufacturing equipment have been a key topic in the negotiations between the two sides.
Prior to the recent trade talks in London, officials from the US Department of Commerce had considered imposing new export restrictions on critical technologies shipped to China. If the negotiations in London do not progress smoothly, strengthening export controls on chips and chip manufacturing equipment could be an option, adding to the strategies of the Trump administration.
According to a report by The Wall Street Journal on June 16, sources revealed that the department of the US Department of Commerce responsible for export controls had been considering tighter regulations on semiconductors in recent weeks. This includes cutting off a broader range of sales of chip manufacturing equipment to China, including equipment used for producing everyday semiconductors, beyond the existing restrictions on advanced chip equipment.
This decision could potentially disrupt the chip supply chain needed for various products ranging from smartphones to automotive manufacturing, while also posing a threat to some leading equipment companies in the US, such as Applied Materials, Lam Research, and KLA Corporation, with revenues in the billions of dollars.
Over the past few fiscal years, around 40% of the revenues of these companies have come from China.
A White House official mentioned that this strategy is currently not actively being considered. However, whether it will become a future measure has not been disclosed by the official.
Last week in London, the US and China agreed to resume a recent ceasefire agreement aimed at reducing high tariffs. The agreement includes the US gaining access to rare earth materials from China and allowing Chinese students to continue studying at universities in the US.
With China imposing a six-month restriction on rare earth exports to the US, if a trade conflict escalates again beyond the six-month period, China’s control over rare earths will once again become a bargaining chip in Beijing’s negotiations.
Manufacturing chips involves specialized equipment to add thin layers of various materials onto silicon chips. Most of this equipment is produced by companies in the US, Netherlands, and Japan.
Dmitri Alperovitch, co-founder of Silverado Policy Accelerator Institute and a supporter of broader restrictive measures, believes, “In the economic war with China, this is the most powerful weapon we have.” He stated, “If you want to play this trump card, now is the time.”
Currently, the Trump administration has taken new measures to curb China’s artificial intelligence industry. For instance, the US Department of Commerce’s Bureau of Industry and Security is preparing to restrict the sale of US technology to many Chinese companies’ subsidiaries and affiliates that are on the trade blacklist.
Government officials do not always have a unified opinion on this issue. National security hawks advocate for more stringent measures, while officials emphasizing commercial considerations hope to strike deals with US companies to support their sales.
Since 2022, the US has been using its semiconductor industry to limit China’s development, a practice criticized by industry executives like Nvidia’s CEO, Jensen Huang, who believe these control measures have actually spurred innovation in China.
At a hearing last Thursday of the House Foreign Affairs Committee, Jeffrey Kessler, the Director of the Bureau of Industry and Security at the Department of Commerce, stated that the agency is conducting a comprehensive review of “strategically significant products.”
Regarding further actions to be taken against China in the semiconductor industry, he expressed a desire to maintain an active stance in developing strategies and ensuring the effectiveness of control measures.
Industry insiders have noted a general stagnation among tech companies in obtaining approval for new export licenses, including a range of products such as chips and chip equipment.
It is reported that the Department of Commerce is currently reviewing the approval process for such licenses. These licenses allow the government to review the destination, recipient, and purpose of the sale of these products.