American lawmakers continue the push for additional restrictions against China’s chip industry with a new bipartisan bill that aims to prevent semiconductor firms from purchasing chipmaking gear from China, Russia, North Korea, and Iran. The proposed bill, known as the Chip Equipment Quality, Usefulness, and Integrity Protection Act of 2024 (Chip EQUIP), would apply to all U.S. based facilities of any company that has received funding from the 2022 Chips and Science Act (CHIPS). The bill appears to have been introduced over fears that China’s recent state subsidies for the semiconductor sector could allow Chinese equipment makers to engage in anti-competitive behavior by undercutting American toolmakers.
The proposed bill restricts purchases on a range of chip making equipment including machines related to the deposition, etching, lithography, wafer production, and polishing process and would increase due diligence and supply chain tracing requirements for semiconductor firms.
In addition to the Chip EQUIP Act, the Biden administration is reportedly working on a new proposal to restrict China’s access to a new kind of chip architecture known as gate-all around (GAA) technology. The GAA transistor architecture allows companies to manufacture more powerful chips by reducing their size to as low as two nm and is seen as a crucial technology for future AI development. It is currently unclear when the U.S. plans to impose restrictions on GAA technology, but such measures could include bans on the export of GAA chips and chipmaking equipment to China.
The U.S. also began pushing for restrictions on the export of new high bandwidth memory (HBM) chips that recently became vital for use in AI projects due to their faster processing speeds and reduced power consumption levels. U.S. officials reportedly pressed their overseas counterparts in Japan, South Korea, and the Netherlands to expand their existing chip restrictions to cover more advanced chips like HBM chips and their associated chip making equipment. The U.S. has pushed for another round of advanced chip restrictions as South Korean chip giants SK Hynix and Samsung are the only two companies outside of U.S. based Micron Technologies that are currently able to produce HBM chips. Japan and the Netherlands are home to advanced chip equipment makers that supply the parts to produce HBM and other types of advanced semiconductors.
Further coordinated restrictions on HBM chips appears unlikely in the short term as a recent trilateral meeting between the U.S., Japan, and South Korea in June failed to produce any new chip restrictions while both the Netherlands and Japan have reportedly requested more time to assess the impact of existing chip controls. Additionally, ongoing political developments related to the formation of a right-wing government in the Netherlands and uncertainty over the outcome of the U.S. presidential election in November have also delayed international coordination on more chip controls. China remains a major market for major non-U.S. chip equipment makers with the Chinese market accounting for 47% of Tokyo Electron’s Q4 2023 revenue and almost half of ASML’s Q1 2024 sales.
European Union targets Chinese EVs
In addition to the semiconductor sector, Western countries are also set to impose additional restrictions on China’s automotive sector over anti-competition concerns with the EU about to implement a provisional tariff on July 4 between 17.4% to 37.6% on electric vehicles (EV) manufactured by Chinese automotive firms BYD, Geely, and SAIC Motor. Other Chinese automotive companies that complied with the EU’s anti-subsidy investigation will be subject to tariffs of 20.8%. Both the EU and China are currently engaged in talks to potentially delay the measure but failure to reach an agreement could prompt Beijing to impose retaliatory tariffs on EU-made vehicles with large engines, a move that would impact sales of German manufacturers who have manufacturing plants in mainland China.
Additionally, China opened an anti-dumping investigation into EU pork imports and the country also appears ready to launch additional investigations into exports of dairy products and cognac from the bloc, suggesting that Beijing could be targeting the EU’s agricultural and consumer goods sectors for retaliatory measures.
Concerns persist over forced labor and Russian military links
Chinese companies face sanctions for supplying restricted electronics and machinery parts to the Russian military, with 19 Chinese companies from the mainland and Hong Kong named in the EU’s 14th sanctions package against Russia on June 24.
In addition to the EU sanctions list, the U.S. government also added three other firms from China to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List on June 12 for deploying Uyghur forced labor in their production facilities across China.
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