Commerce’s Bureau of Industry and Security (BIS) announced a package of rules designed to further impair China’s capability to produce advanced-node semiconductors that can be used in the next generation of advanced weapon systems and in artificial intelligence and advanced computing.
In response, the Chinese government imposed further restrictions on the export of "dual use" commodities, banning sales of gallium, germanium, antimony and other metals, while imposing greater controls over graphite sales to the West.
In a related move, four Chinese industry associations voiced their opposition Tuesday to the US' most recent chip export controls. targeting Chinese enterprises. They called on relevant sectors to "exercise caution when purchasing chips from the US." Statements from the China Semiconductor Industry Association (CSIA), the China Association of Automotive Manufacturers (CAAM), China Association of Communications Enterprises (CACE) and The Internet Society of China (ISC) encouraged their members to shun US chip suppliers, calling them " no longer safe and reliable."
The US action is a proactive measure enhancing the Department of Commerce’s work to impede the PRC’s ability to procure and produce the technologies necessary for its military modernization, according to the Department,
The controls target some, but not all affiliates of chip manufacturers SMIC and Huawei, as well as semiconductor manufacturing equipment manufacturers in the PRC.
The controls were developed in consultation with allied governmnts and representatives of industry, Commerce officials said.
“We are constantly talking to our allies and partners as well as reassessing and updating our controls. Today’s announcement represents the next step in that ongoing work,” said Under Secretary of Commerce for Industry and Security Alan Estevez.
Assistant Secretary of Commerce for Export Administration Thea D. Rozman Kendler noted “These rules build on previous actions taken in service of our longstanding goal: protecting our collective security by constraining the PRC’s ability to indigenize the most advanced technologies, without unduly interfering with the continuing trade of technology.”
While the intent of the rulles is clear: defend the West's competitive edge.
“The purpose of these Entity List actions is to stop PRC companies from leveraging U.S. technology to indigenously produce advanced semiconductors,” said Matthew S. Axelrod, Assistant Secretary for Export Enforcement.
“By adding key semiconductor fabrication facilities, equipment manufacturers, and investment companies to the Entity List, we are directly impeding the PRC’s military modernization, WMD programs, and ability to repress human rights,” he continued.
The rules include new controls on
"All of the policy changes announced today are designed to limit the PRC’s ability to indigenize the production of advanced technologies – such as advanced-node integrated circuits and the equipment used to produce them – that pose a substantial risk to U.S. national security," read the BIS announcement.
"The semiconductor manufacturing equipment controlled by today’s rules is needed to produce advanced-node integrated circuits, which are necessary for advanced weapon systems and advanced AI used in military applications."
"Advancements in large-scale AI models have shown striking performance improvements across many human abilities and may be used in advanced military and intelligence applications. These models have the ability to rapidly review and synthesize large amounts of information into actionable points.
"Advanced AI models could be used for rapid response scenarios on the battlefield; lowering the barrier to develop cyberweapons or chemical, biological, radiological, or nuclear weapons; and utilizing facial and voice recognition to repress and surveil minorities and political dissidents.
The announcement underscores the United States’ “small yard, high fence” strategy and will restrict the PRC’s ability to produce technologies key to its military modernization or repression of human rights.
In line with these objectives, BIS is implementing several regulatory measures, including but not limited to:
A Footnote 5 (FN5) designation by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) identifies entities on the Entity List that are considered “military end users” located in or associated with countries specified in Country Group D:5, including Macau.
Such entities are being designated on the Entity List for specific national security or foreign policy concerns described in the Entity List companion rule, such as these entities’ involvement in supporting the PRC’s military modernization through the PRC’s attempts to produce advanced-node semiconductors, including for military end-uses.Rep John Moolenaar (R-MI) Chair of the House Select China Committee wrote Secretary of Commerce Gina Raimondo expressing his concern that these rules "create loopholes that will continue to allow Chinese bad actors to access US technology and raise questions about the undue influence of the semiconductor industry over the Bureau of Industry and Security's decision-making."
Citing exemptions for Huawei, SMIC and CXMT, the lawmaker says "It remains a mystery why BIS would purposefully design their controls in a way that helps PRC firms."
"There is no national security justification for these loopholes. Rather, their existence seems to imply that press reporting on industry influence over BIS are accurate". Read the full letter [here]
The Rules are available on the Federal Register:
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