The Biden administration plans to announce a new regulation next month, expanding restrictions on the export of foreign semiconductor equipment to prevent certain foreign semiconductor manufacturing equipment from being exported to Chinese chip manufacturers, according to two sources reported by Reuters on Wednesday, July 31.
However, key semiconductor manufacturing equipment exported by allies such as Japan, the Netherlands, and South Korea will be exempt. Major chip equipment manufacturers like ASML from the Netherlands and Tokyo Electron from Japan will not be affected. Following the news, the stock prices of these two companies surged.
One of the sources mentioned that the regulation will prevent China’s most advanced chip manufacturing plants from receiving semiconductor manufacturing equipment exports from many countries. Countries impacted by this include Israel, Taiwan, Singapore, and Malaysia.
When asked about the upcoming export control measures by the United States, Chinese Foreign Ministry spokesperson Lin Jian said that the US was “pressuring other countries to suppress China’s semiconductor industry,” undermining global trade and hurting various interests.
He added that China hopes relevant countries will resist US efforts and safeguard their own long-term interests.
In order to prevent the Chinese military from obtaining supercomputing and AI capabilities, the US implemented export controls on Chinese chips and chip manufacturing equipment in 2022 and 2023.
According to reports, the new regulation is still in the drafting stage, showing that Washington is seeking to continue pressuring the Chinese semiconductor industry without provoking displeasure among allies.
The Foreign Direct Product Rule stipulates that if a product is manufactured using US technology, the US government has the authority to prevent its sale, including products manufactured overseas.
Sources indicated that another part of the latest export control plan would lower the threshold determining when foreign items are subject to US control, saying this would address gaps in the Foreign Direct Product Rule.
They stated that, for example, equipment could be designated for export control simply because it contains chips with US technology.
The US also plans to add around 120 Chinese entities to the Entity List, including six chip manufacturing plants called fabs, tool manufacturers, and electronic design automation (EDA) software suppliers.
Sources said that the new rules in the plan are currently just a draft and may change, but the aim is to announce them in some form next month.
In addition to Japan, the Netherlands, and South Korea, the draft also exempts over thirty other countries in the same group.
The US Commerce Department stated on its website that “countries are categorized based on factors such as diplomatic relations and security considerations” to help determine licensing requirements and simplify export control regulations, ensuring legitimate and secure international trade.
On Wednesday, ASML’s stock price rose by 6.5% in early trading in Amsterdam, while Tokyo Electron’s stock price increased by 7.4% at the close. Other Japanese chip-related equipment manufacturers also saw strong gains, with Screen Holdings rising by 9% and Advantest by 4.5%.
An unnamed US official mentioned, “Effective export control relies on multilateral support. We continue to work with like-minded countries to achieve our shared national security goals.”