U.S. Restricts Semiconductor Exports in Bid to Slow China’s Military Advance

The U.S. already requires licenses for exports of many advanced technologies to Chinese entities deemed to be working against U.S. national-security interests. Friday’s move expands that to include exports of crucial cutting-edge chips and equipment that can’t be obtained elsewhere.

The rules will also allow the U.S. to block foreign-made chips that are manufactured with U.S. technology, the officials said.

The curbs, some of the most sweeping actions in a yearslong effort to hold China’s chip industry back, have been anticipated for months. Officials described them as necessary to keep China from building up its military, developing new, state-of-the-art weaponry and further enhancing its surveillance network, already one of the world’s most sophisticated.

“We believe certain advanced computing capabilities which rely on U.S. chips, software, tooling and technology are fueling the [Chinese] military modernization, including the development of weapons of mass destruction,” a senior administration official said. “These capabilities are also used in other activities of serious concern, including large-scale surveillance activities enabling human-rights violations and abuses.”

Allowing China and its military access to the most advanced chips and chip-making equipment “poses profound national-security risks,” the official said.

The Semiconductor Industry Association said it was assessing the impact of the new rules.

“We understand the goal of ensuring national security,” the trade group said, but added that it hoped the rules could be implemented in a way that wouldn’t result in “unintended harm to U.S. innovation.”

The new restrictions also include a restriction on chip-making machinery capable of making some of the most advanced number-crunching chips as well as computer-memory and data-storage chips, the officials said. Further controls are being placed on items China could use to develop its own manufacturing-equipment industry, they said.

The semiconductor industry was born in the U.S. but has shifted outside of the country in recent decades, mostly to Taiwan, South Korea and China, a state of affairs U.S. officials and legislators see as a worrying national-security vulnerability.

Advanced chips are increasingly a pillar of geopolitical power, underpinning both military systems and data-processing capabilities that drive modern economies. The U.S. is working to get allies on board with the restrictions and enact similar ones themselves.

The rules appeared to carve out at least one concession to some of those allies. While license applications would be subject to a presumption of denial, the Commerce Department would review applications for certain exports to U.S. and U.S.-allied facilities operating in China, a senior official said. Chip makers based in South Korea and Taiwan operate large factories in China, and could see those businesses disrupted if U.S. restrictions cover all facilities in China.

In addition to the controls on chips and chip equipment, the Commerce Department is adding restrictions on U.S. citizens, permanent residents and companies providing support to some Chinese chip-making facilities, and expanding restrictions on 28 Chinese entities already on the department’s export blacklist that are involved in the country’s supercomputing industry, an administration official said.

China “has poured resources into developing supercomputing capabilities and seeks to become a world leader in artificial intelligence by 2030. It is using these capabilities to monitor, track, and surveil their own citizens, and fuel its military modernization,” Thea D. Rozman Kendler, the assistant secretary of commerce for export administration, said in a statement.

The controls were announced as the administration has sought to burnish its record on technology and national security ahead of the Nov. 8 midterm elections. Congress this year approved more than $50 billion in subsidies for expanding the domestic semiconductor industry, part of a broader effort to secure domestic supply chains and keep the U.S. ahead of China on cutting-edge tech.

In the wake of the legislation, Democrats have cheered announcements of new investments in domestic manufacturing by the likes of

Micron Technology Inc.

President Biden traveled to New York on Thursday to tout new investments by

IBM Corp.

The Chinese Embassy in Washington criticized the latest regulatory moves based on preliminary reports, saying they are aimed at holding back emerging economies such as China.

“What the U.S. is doing is purely ‘sci-tech hegemony,’” said spokesman Liu Pengyu. “It seeks to use its technological prowess as an advantage to hobble and suppress the development of emerging markets and developing countries,” including China.

The Commerce Department’s new restrictions expand on guidance that the government has issued this year in letters to individual chip equipment and design companies.

For example,

Nvidia Corp.

disclosed in August that it could lose as much as $400 million in quarterly sales after the U.S. imposed new licensing requirements on shipments of some of its most advanced chips to China. The U.S. imposed the requirement to address the risk that the products could reach the hands of military users, Nvidia said.

A Commerce Department-led process that reviews U.S. tech exports to China approves almost all requests and has overseen an increase in sales of some particularly important technologies, according to an analysis of trade data, The Wall Street Journal recently reported. Critics say the Commerce Department has put U.S. commercial interests above that of national security, which the department disputed.

The Commerce Department on Friday added 31 Chinese parties to its so-called unverified list, a grouping of companies the agency has concerns about but isn’t ready to add to its blacklist, known as the entity list. The agency also made clear that if a foreign country doesn’t cooperate in allaying those concerns, the company can be moved to the entity list.

The U.S. has long sought to limit the development of China’s semiconductor industry by placing companies on the entity list, including telecom giant Huawei Technologies Co. and the country’s largest chip maker,

Semiconductor Manufacturing International Corp.

, or SMIC.

The clampdown intensified amid the trade wars of the Trump administration, and the Biden administration has largely picked up where its predecessor left off.

Write to John D. McKinnon at [email protected] and Asa Fitch at [email protected]