US Gov Bans Certain Semiconductors
The U.S. Federal Acquisition Regulation has been updated to prohibit certain semiconductor products and services from government use. This regulatory change signals heightened scrutiny of aerospace and defense supply chains, increasing the need for robust component sourcing and traceability.
- This regulation specifically targets semiconductors designed or produced by major Chinese manufacturers, including Semiconductor Manufacturing International Corp (SMIC), ChangXin Memory Technologies (CXMT), and Yangtze Memory Technologies Corp (YMTC), along with their subsidiaries. Other "foreign countries of concern" such as Russia, North Korea, and Iran are also included in the broader scope of the prohibition. - The ban is set to take full effect in December 2027, with the Federal Acquisition Regulatory Council required to issue final implementation rules by December 2025. This timeline is intended to give the industry time to adapt their supply chains. - This action is part of a larger U.S. strategy to impede China's military modernization by restricting its access to advanced technologies that have applications in artificial intelligence and advanced weapon systems. The U.S. government has been strengthening export controls on advanced semiconductor technologies to China since 2018. - Defense contractors will be required to conduct a "reasonable inquiry" to identify and avoid the use of banned semiconductors in their products. While they can rely on supplier certifications, there is a push for greater transparency, with considerations for requiring contractors to disclose the entire provenance of their semiconductor supply chain. - This semiconductor ban mirrors a similar prohibition on telecommunications equipment from certain Chinese manufacturers that was implemented in 2019 under Section 889 of the National Defense Authorization Act. - The financial burden of non-compliance will fall on the contractors, who will be liable for the costs of any necessary rework or corrective actions to remove prohibited semiconductor products. - An estimated 75% of defense contractors could be affected by this ban, with projections that up to 20% of the semiconductors currently in their products may be non-compliant. This is expected to cause significant disruptions, potentially leading to increased costs and project delays. - To enforce this, the Disruptive Technology Strike Force, a collaboration between the Departments of Justice and Commerce, was launched in February 2023 to protect advanced technology from being unlawfully acquired by foreign adversaries.
