China policy reshapes sourcing
New Chinese rules are making it harder for foreign firms to shift supply chains out of China while Beijing and local suppliers adapt to tighter U.S. export controls. DigiTimes reports Chinese chip‑tool imports are being rerouted through Southeast Asia as U.S. restrictions bite, and that Chinese equipment makers are entering the global top‑20—while CHIPS Act recipients face a ten‑year bar on buying Chinese chipmaking tools. (nytimes.com) (digitimes.com)
China has made it riskier for foreign companies to move supply chains out of the country as chip-tool trade is being rerouted through Southeast Asia. (nytimes.com) China’s State Council published new industrial and supply-chain security rules on April 8, 2026, and the rules took effect immediately. State media said the 18-article regulation is meant to prevent supply-chain risks, support core technology research and keep global supply chains “stable and smooth.” (english.scio.gov.cn) Outside lawyers and other news outlets said the same rules give Chinese authorities power to investigate disruptions, restrict supply-chain information gathering and punish entities judged to threaten access to key inputs or the flow of goods. Multinationals told The New York Times they fear the rules could be used against efforts to shift production elsewhere. (squirepattonboggs.com) (scmp.com) (nytimes.com) At the same time, the United States has tightened export controls on semiconductor manufacturing equipment, the factory tools used to make chips. A December 5, 2024 Bureau of Industry and Security rule added controls on more chipmaking equipment and related items, alongside new foreign direct product restrictions. (federalregister.gov) DigiTimes reported on April 15 that Chinese imports of chipmaking tools are increasingly arriving through Singapore and Malaysia as direct access gets harder. Nikkei Asia separately reported that imports from those two countries hit records as Chinese buyers kept sourcing United States tools through Southeast Asia. (digitimes.com) (asia.nikkei.com) Washington is also constraining companies that take federal chip subsidies. A 2023 final rule implementing the CHIPS and Science Act bars recipients and their affiliates, for 10 years, from significant transactions that materially expand semiconductor manufacturing capacity in a foreign country of concern, including China. (federalregister.gov) That rule does not ban every transaction in China, but it forces subsidy recipients to avoid expansions that could trigger an “expansion clawback.” Commerce later revised the definition of “material expansion” in December 2023 to clarify that building new semiconductor facilities can fall within the ban. (federalregister.gov) The result is a two-sided squeeze. Beijing is raising the legal and political cost of moving supply chains out, while Washington is raising the legal and financial cost of deepening certain chip operations tied to China. (nytimes.com) (federalregister.gov) (english.scio.gov.cn) Chinese suppliers are also moving up the equipment ladder instead of waiting for restrictions to ease. DigiTimes said Chinese chip-equipment makers have entered the global top 20, even as foreign tool shipments are rerouted and controlled more tightly. (digitimes.com) For manufacturers that spent the past three years talking about “China plus one,” the new reality is narrower. Parts, tools and legal exposure can still run through China, even when the paperwork points to somewhere else. (nytimes.com) (digitimes.com)
