US chip ban in China

The United States has imposed restrictions on semiconductor technology exports to China, which may setback Chinese technological development. The US chip ban in China can harm the semiconductor supply chain and impact Taiwanese and South Korean semiconductor companies. It only shows how much significance Joe Biden’s government has.

US chip ban in China – US-China chip war

The largest producer of semiconductors in the world is Taiwan. China is in fourth place, and the US – the fifth.

The Biden administration has restricted sales to China of US semiconductor technology for AI applications. The export controls include:

  • the technology used in supercomputer systems
  • equipment needed to manufacture state-of-art chips
  • 16 nm and more efficient chips
  • 18 nm DRAM chips
  • NAND-style flash memory chips with 128 layers or more.

In total, several dozen Chinese companies are subject to restrictions. If a US company wishes to sell such technology, it must request an exception to the rules. In addition, the United States blocks the sale of American technology to China by other countries.

By imposing restrictions on China, the US wants to temper the growing power, not only economic but also military. It is forecasted that SMIC sales, the Chinese chip-making technology giant, will drop by as much as 50% in the next year. It is all because the Chinese do not have the technology from the US. China will also not get state-of-art technology from the Dutch giant ASML, which is banned from selling to the country. However, production in the household appliances and car industries will be unaffected, as it requires older generation chips.

The impact of the restrictions

On the one hand, the restrictions will hinder cutting-edge technology development in China. On the other hand, the US chip ban will lead to losses of hundreds of billions of dollars on a global scale. The semiconductor market lost more than USD $240 billion just days after the restrictions were introduced.

The restrictions will affect manufacturers of semiconductors (chips), including companies from South Korea (e.g. Samsung) and Taiwan (e.g. the largest supplier of integrated circuits, TSMC), which have factories in China. These and similar companies have already recorded a loss on the stock exchange. These two companies, however, have negotiated a temporary exemption from the US-imposed export control measures. South Korean SK Hynx also negotiated one-year access to chip equipment for factories in China.

The United States plans to strengthen its position among the largest semiconductor manufacturers. Recently, a $280bn CHIPS and Science Act has passed to encourage onshore chip production.