Chip equipment manufacturers are set to face increasing trade and regulatory controls as the U.S. government continues to push for greater international cooperation to limit China’s advanced semiconductor capabilities. One of the most controversial srestrictions that the U.S government is currently considering is the enforcement of a trade measure called the foreign direct product rule (FDPR), which requires non-U.S. companies to follow licensing requirements under the Export Administration Regulations for products that contain U.S. origin components or technologies.
The Biden administration is reportedly considering imposing the rule in order to get advanced chip equipment companies in the Netherlands and Japan like Tokyo Electron Ltd. and ASML Holding NV to observe the same trade restrictions as U.S. chip companies like Lam Research Corp., KLA Corp., and Applied Materials Inc. Authorities in both the Hague and Tokyo have reportedly been hesitant to follow the U.S. in imposing additional chip export controls due to political uncertainty caused by the upcoming American presidential election in November. However, officials in the Biden administration have indicated that applying the FDPR rule to foreign chipmakers could be necessary to ensure the competitiveness of local semiconductor equipment suppliers who have seen their market capitalization decrease by around $130 billion since the chip controls began.
Another restriction that is also under consideration includes a potential expansion of the Bureau of Industry and Security’s Unverified List to cover Chinese customers that are actively being served by non-U.S. chipmakers in order to force these companies to seek licenses. U.S. officials are also set to increase compliance and reporting requirements for computing and cloud service providers like Google and Microsoft over claims that Chinese companies have been renting computing servers outside of mainland China in order to access the computing power of controlled AI chips that are unavailable domestically.
In addition to these restrictions, media reports also claim that the Biden administration is planning to halt sales of Nvidia Corporation’s HGX-H20 AI GPUs to China in October 2024. Officials are also reportedly considering export restrictions on sales of the chip to other Southeast Asian countries like Malaysia and Thailand in order to prevent chips from being delivered to overseas subsidiaries of Chinese chip companies. Nvidia previously developed the H20 chip for the Chinese market following the last major tightening of export controls by the U.S. in October 2023, but American officials are reportedly seeking to further control sales of the chip as Nvidia’s product has continued to remain the most powerful AI chip available to the Chinese market.
Everstream clients are receiving more detailed insights and recommendations about this risk.
Don’t miss key supply chain risk updates! Subscribe now to get supply chain news, weather updates, forecasts, and other insights.