December 1, 2022

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Biden administration tightens restrictions on China's access to chip technology

Biden administration tightens restrictions on China’s access to chip technology

Perhaps most importantly, the Biden administration has also imposed broad international restrictions that would prevent companies anywhere in the world from selling chips used in artificial intelligence and supercomputing in China if they were manufactured using American technology, software, or machines. The restrictions used what is known as the Foreign Direct Products Rule, which was recently deployed by former President Donald J. Trump to cripple Huawei.

Another FDI rule prohibits sending a larger selection of products made outside the United States using American technology to 28 Chinese companies that have been placed on the “Entity List” due to national security concerns.

Those companies include Beijing Sensetime Technology Development, a unit of major Chinese artificial intelligence firm SenseTime. It also included Dahua Technology, Higon, iFLYTEK, Megvii Technology, Sugon, Tianjian Phytium Information Technology, Sunway Microelectronics, Yitu Technologies, as well as a variety of laboratories and research institutions associated with Chinese universities and government.

Briefing reporters, senior administration officials said the measures would be limited to more advanced chips and would not have a broad commercial impact on private Chinese companies. But they acknowledged that the restrictions could become more restrictive over time, given that the technology would begin to exceed the advanced technological standards set out in the rules.

Industry executives say many Chinese industries that rely on artificial intelligence and advanced algorithms are bolstering these capabilities with US GPUs, which will now be constrained. Those working with technologies such as autonomous driving and gene sequencing, as well as artificial intelligence firm SenseTime and ByteDance, include the Chinese internet company that owns TikTok.

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The new restrictions on sales of chip-making equipment are also expected to constrain the operations of domestic chip manufacturers in China, including Semiconductor Manufacturing International, Yangtze Memory Technologies and ChangXin Memory Technologies.

The actual impact of the restrictions will depend on how the policy is implemented. For most of the measures, the Commerce Department has the discretion to grant special licenses to companies to continue selling restricted products to China, though it said most of them would be denied.