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US Quietly Tightens Grip on Exports of Chipmaking Gear to China

The US is tightening restrictions on China’s access to chipmaking gear, according to two major equipment suppliers, underscoring Washington’s accelerating efforts to curb Beijing’s economic ambitions.

July 30, 2022 / 09:55 AM IST
Joe Biden has spoken to Xi Jinping five times since he became US president.

Joe Biden has spoken to Xi Jinping five times since he became US president.

The US is tightening restrictions on China’s access to chipmaking gear, according to two major equipment suppliers, underscoring Washington’s accelerating efforts to curb Beijing’s economic ambitions.

Washington had banned the sale of most gear that can fabricate chips of 10 nanometers or better to Chinese leader Semiconductor Manufacturing International Corp. without a license. Now it has expanded that barrier to equipment that can make anything more advanced than 14 nm, Lam Research Corp. Chief Executive Officer Tim Archer told analysts. The moratorium likely extends beyond SMIC and includes other fabrication plants run by contract chipmakers operating in China, including those by Taiwan Semiconductor Manufacturing Co.

“We were recently notified that there was to be a broadening of the restrictions of technology shipments to China for fabs that are operating below 14 nanometers,” Archer said on a conference call on Wednesday. “That’s the change, I think, people have been thinking might be coming and we’re prepared to fully comply. We’re working with the US government.”

In chip manufacturing, production identified by lower numbers of nanometers is more advanced. That means raising the restriction level to 14 nm from 10 would cover a broader range of semiconductor equipment.

The Commerce Department said in a statement it is tightening policies aimed at the People’s Republic of China, without specifying the precise chip geometry.

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“The Biden Administration is focused on impairing PRC efforts to manufacture advanced semiconductors to address significant national security risks to the United States,” the agency said.

In the past two weeks or so, all US equipment makers have received letters from Commerce telling them not to supply gear to the Chinese for manufacturing at 14 nm or below, according to people familiar with the matter. The letters are at least partly an effort by the Biden administration to look tough on China, but Commerce had already declined many licenses at 14 nm so the change will have little financial impact, they said.

The new requirements are targeted at foundries -- facilities making logic chips for others -- and exclude memory chips “to the best of our understanding,” Archer said. Lam Research executives said they had incorporated the impact of the US requirements into their outlook for the September quarter, without elaborating.

KLA Corp. CEO Rick Wallace on Thursday also confirmed his company had been notified by the US government of the change in export licensing requirements on China-bound gear for chips more advanced than 14 nm. Wallace said there was no material impact on KLA’s business.

The comments from the two California-based companies mark the first detailed confirmation that the Biden administration is ramping up attempts to contain China. The US is pushing partner countries like the Netherlands and Japan to ban ASML Holding NV and Nikon Corp. from selling to China mainstream technology essential in making a large chunk of the world’s chips, Bloomberg News has reported.

The new rules cover a wider swath of semiconductors across a plethora of industries and possibly impact far more companies than standing restrictions targeted at SMIC. While the new curbs specifically cover equipment capable of making chips more advanced than 14 nm, mature chips could still be affected as about 90% of gear is compatible from one generation to the next. Semiconductor manufacturers can reuse equipment as they migrate to more sophisticated nodes, meaning a ban on one generation could have longer-term ripple effects.

SMIC and TSMC are the two companies with the most advanced logic chipmaking capabilities in China. SMIC’s most sophisticated technology is 14 nm, while TSMC’s best is 16 nm in the country. Those are three generations behind the most cutting-edge technology TSMC owns in Taiwan.

The new rules are likely to impact SMIC, TSMC and any others with the ambition to build capacity for relatively advanced chips in China, as well as gearmakers such as Applied Materials Inc., ASML and Tokyo Electron Ltd. that sell to the world’s largest semiconductor market.

Representatives for TSMC, Tokyo Electron and SMIC didn’t immediately respond to requests for comment. An ASML spokesman said the company has not been notified of the potential new rules. A Nikon spokesperson said its shipments to China are not affected.
Bloomberg
first published: Jul 30, 2022 09:55 am
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