America’s ‘once unthinkable’ chip export restrictions will hobble China’s semiconductor ambitions

The U.S. government has introduced some of its most sweeping export controls yet aiming to cut China off from advanced semiconductors. Analysts said the move could hobble China’s domestic chip industry.

After the U.S. launched some of its most wide-ranging export controls against Beijing, China's ambitions to boost its domestic chip industry have become more difficult and costly.

On Friday, the U.S. Department of Commerce introduced sweeping rules aimed at cutting China off from obtaining or manufacturing key chips and components for supercomputers, in what is seen as a huge escalation in tensions between Beijing and Washington.

America believes that China can use advanced Semiconductors for military purposes.

There is no return to the way things used to be, according to the co- founder of the Center for Innovating the Future.

The chasm between the US and China has now grown to the point of no return.

Some of the new U.S. rules are listed here.

• Companies require licenses to export high-performance chips, usually designed for artificial intelligence applications, to China.
• Even foreign-made chips related to AI and supercomputing, that use American tools and software in the design and manufacturing process, will require a license to be exported to China.
• U.S. companies will be heavily restricted in exporting machinery to Chinese companies that are manufacturing chips of a certain sophistication.

Washington is not trying to rebuild relations with Beijing. The US is making it clear that it is taking this competition more seriously than it ever has before, and is willing to take steps that were once unthinkable.

Some of the most important technology products are transistors. They go into a lot of different things. They are important to military applications and artificial intelligence.

Tensions between China and the U.S. have intensified in the past few years and have dragged technology into the fight.

China wants to boost its domestic capabilities in areas like artificial intelligence and quantum computing. The new U.S. rules will make that very difficult.

According to the chairperson of the high tech geopolitics program at the Takshashila Institute, the U.S. has shifted its goal from being ahead of China in the chip industry to being behind.

The Chinese chip sector will be hampered by these controls.

The reason why the U.S.'s export controls are so effective is that they can touch many parts of the supply chain, even those not directly based in America.

The global nature of the chip supply chain is one of the reasons.

The United States is no longer the leader in manufacturing. The manufacturing of the world's most advanced Semiconductors has been dominated by Taiwan's TSMC and South Korea's SAMSUNG over the last 15 years.

Reinventing the wheel will be far more costly now (for China).

The global foundry market is dominated by Taiwan and South Korea. Foundries are places that make chips.

Many of the design tools used by other companies in the supply chain are from the U.S. American tools are likely to be used in the manufacturing of advanced chips by TSMC. The U.S. export restrictions to China will be applied.

The poster child of the U.S.-China tech tensions is the Chinese company, Huawei. The most advanced chips that TSMC was manufacturing were not allowed to be used byHuawei. The company that used to be the number one player in the phone market was crippled by the economic downturn.

This is the first time that such a rule has been used in the U.S.

Other countries may be under pressure to not send equipment to China. The new rules mean that companies will need to get licenses to ship machinery to Chinese foundries if they are making certain memory chips or logic chips of 16 nanometer or below.

Each transistor on a chip has a nanometer figure. More transistors can be packed onto a single chip. More powerful and efficient chips can be produced by a reduction in the size of the chip.

Semiconductor Manufacturing International Co., or SMIC, is the most advanced chipmaker in China. It's generations behind the likes of TSMC and SAMSUNG, which have a plan to make 2nd generation chips.

To make chips of this sophistication on a large scale, with lower costs and more reliability, SMIC and other Chinese foundries will need to get their hands on a specific piece of kit. ASML is the only company in the world that can make this piece of machinery.

It could hamper progress among the country's chipmakers if it falls under the U.S.'s export restrictions.

The Semiconductor supply chain is complex.

Semiconductor production is a global chain. Chinese companies will have to re-invent the wheel if they are cut off from this engine. Kotasthane said that China's Semiconductor industry will need a lot of capital and talent.

This will be a challenge.

The yield will be far lower, meaning higher costs and lower reliability, because China will be able to make advanced chips even without ASML.

Kotasthane said that Chinese firms would usually get their design tools from American and Japanese companies.

If you want to support the development or production of semiconductors at certain China-based manufacturing facilities, you need to get a license from Washington. A key source of American talent to China has been cut off.

Kotasthane said that reinventing the wheel would be more expensive.