The United States prepares restrictions on Chinese chips that do not meet the first proposals

(Bloomberg) — The Biden administration is considering further restricting sales of semiconductor equipment and AI memory chips to China, which would intensify a U.S. crackdown on Beijing's tech ambitions, but without taking some steps stricter measures previously considered, according to people familiar with the matter. .

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The restrictions could be unveiled as early as next week, said the sources, who stressed that the timeline and contours of the rules have changed several times and nothing is final until they are published. The moves follow months of deliberations by U.S. officials, negotiations with allies in Japan and the Netherlands, and intense lobbying by U.S. chip equipment makers, who have warned that stricter measures would catastrophically harm their businesses.

The latest proposal has key differences from previous versions, the sources said. The first concerns Chinese companies that the United States would add to a list of trade restrictions. The United States had previously considered sanctioning six suppliers to Huawei Technologies Co., the telecommunications giant at the center of China's technology industry, and officials are aware of at least a half-dozen others, the sources said. But they now plan to add only some of those Huawei suppliers to the entity list, with the notable omission of ChangXin Memory Technologies Inc., which is trying to develop AI memory chip technology.

Spokespeople for the Commerce Department's Bureau of Industry and Security declined to comment. A spokesperson for the National Security Council referred questions to the BIS.

Why global powers are competing for computer chips: QuickTake

Chip stocks in Asia and Europe jumped following the news. ASML Holding NV rose 5.5%, leading a rally in chip gear companies including BE Semiconductor Industries NV and Aixtron SE. In Japan, Tokyo Electron Ltd. jumped 7%, Screen Holdings Co. gained 6% and Kokusai Electric Corp. jumped almost 13%.

This version of the restrictions plan seemed better than the worst-case scenario that worried the market, said Leping Huang, chief technology analyst at Huatai Securities.

Earlier: US considers sanctioning Huawei's secret Chinese chip network

The rules currently under consideration would also sanction two chip factories owned by Semiconductor Manufacturing International Corp., Huawei's chipmaking partner, the sources said. More than 100 additional entity lists would focus on Chinese companies that make semiconductor manufacturing equipment, the sources said, rather than the manufacturing facilities that make the chips themselves. Wired reported earlier that the United States could develop new export control rules as early as next Monday.

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It's a partial victory for U.S. chip equipment makers Lam Research Corp., Applied Materials Inc. and KLA Corp. who have been fighting for months against unilateral US restrictions on major Chinese companies, including Huawei's six suppliers. They said such sanctions would put them at an unfair disadvantage compared to foreign rivals Tokyo Electron and Dutch equipment giant ASML, whose governments have yet to agree to the toughest restrictions on sales to China. Japan and the Netherlands have imposed some restrictions on China to partially match U.S. measures starting in 2022, but both countries have resisted recent U.S. pressure for even tighter controls.

This summer, U.S. officials attempted a tough negotiating tactic with allies by warning that the United States could directly curb sales of foreign companies to China, a move that Japan and the Netherlands saw as a draconian excess. The United States hoped that the threat of using the so-called Foreign Direct Products Rule, or FDPR, would prompt its allies to impose their own restrictions. But Tokyo and The Hague have shown little interest in aligning with the Biden administration ahead of President-elect Donald Trump's return to power.

The new U.S. rules, which also restrict certain categories of additional tools, would still exempt allies including Japan and the Netherlands from the FDPR's provisions, people familiar with the matter said. It is unclear whether Japan or the Netherlands will eventually impose additional restrictions on Chinese companies that the United States is now considering sanctioning.

Earlier: US weighs restrictions on China's access to AI memory chips

The latest version of the U.S. controls would also include some provisions for high-bandwidth memory chips, which manage data storage and are key to artificial intelligence. Samsung Electronics Co. and SK Hynix Inc. as well as U.S. memory maker Micron Technology Inc. are expected to be affected by the new measures, the sources said.

–With help from Sangmi Cha and Edwin Chan.

(Updates with European stock action, analysts comment from fifth paragraph.)

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