US Tightens Tech Supply Chain Rules Targeting China
The U.S. government has intensified its restrictions on technology supply chains linked to China, instituting a new Federal Acquisition Regulation that prohibits certain semiconductor products from government procurement. Additionally, new presidential action has extended national security reviews to semiconductor supply chains, while a separate investigation was launched into imports of power converters and circuit board assemblies.
- These actions build on a history of measures targeting China's tech sector, including placing companies like Huawei and Semiconductor Manufacturing International Corp. (SMIC) on the Commerce Department's Entity List, which restricts their access to U.S. technology. The U.S. has also utilized Section 301 of the Trade Act of 1974 to impose tariffs on billions of dollars worth of Chinese goods, citing unfair trade practices related to technology transfer and intellectual property. - In response to U.S. restrictions, China has implemented its own export controls on critical minerals essential for semiconductor manufacturing, such as gallium and germanium, and has launched investigations into U.S. companies like Micron Technology. These moves are part of a broader "Made in China 2025" strategy to reduce reliance on foreign technology and enhance domestic capabilities. - The latest U.S. export controls specifically target China's ability to produce advanced semiconductors at or below 7 nanometers, which are crucial for artificial intelligence and other next-generation applications. This includes restrictions on 24 types of chip-making equipment and three kinds of core software. - Economically, the global semiconductor shortage has had significant impacts, costing the U.S. economy an estimated $240 billion in 2021 and leading to production delays in industries like automotive, which lost an estimated $500 billion worldwide. The ongoing trade friction is expected to have a cumulative GDP impact on China of up to 0.8% between 2024 and 2026. - The restrictions extend beyond just semiconductors, with the U.S. government also scrutinizing and in some cases banning technology from Chinese drone manufacturers like DJI, citing national security risks and their use in surveillance. - The U.S. has been working with allies, including the Netherlands and Japan, to create a unified front on restricting China's access to advanced semiconductor technology, impacting major equipment suppliers like Dutch firm ASML. - China has significantly increased its investment in its domestic semiconductor industry to counteract U.S. sanctions. Over the past decade, Beijing has invested an estimated $900 billion in developing its AI, quantum computing, and biotechnology sectors. - These policies are part of a larger strategic competition over global technological leadership, with both the U.S. and China viewing dominance in areas like AI, quantum computing, and biotech as critical to future economic and national security.
