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US Semiconductor Trade Association Urges China Bans to be Reconsidered

Neil Campbell
Neil lives in Canada and writes about society and politics.
Published: July 18, 2023
The SIA has asked the Biden admin to reconsider bans on semiconductor sales to Mainland China.
A file photo of a semiconductor wafer displayed on a screen at the Taiwan Semiconductor Manufacturing Company (TSMC) Renovation Museum in July of 2023. The Semiconductor Industry Association (SIA) has urged the Biden administration to reconsider additional pending bans on sales of chips to China. (Image: SAM YEH/AFP via Getty Images)

A trade group that describes itself as “the voice of the U.S. semiconductor industry” has called on the Biden administration to lay off a series of foreshadowed sanctions against sales from the chip industry to Mainland China.

The Semiconductor Industry Association (SIA) made the declaration in a brief July 17 statement published on its website where it said, “Allowing the industry to have continued access to the China market, the world’s largest commercial market for commodity semiconductors” is imperative to avoid undermining the national security gains from the 2022 CHIPS and Science Act.

CHIPS pumped some $50 billion in stimulus funds into the industry, which heavily struggled throughout 2022 as the benefits of Coronavirus Disease 2019 (COVID-19) financial measures on the middle class waned and the digital currency markets crashed.

The SIA said further sanctions that “impose overly broad, ambiguous, and at times unilateral restrictions” serve only to “risk diminishing the U.S. semiconductor industry’s competitiveness, disrupting supply chains, causing significant market uncertainty, and prompting continued escalatory retaliation by China.”

The most notable sanction the industry group refers to is likely one foreshadowed to be levied against NVIDIA, one of the hottest stocks on the U.S. equities markets, in a late June piece published by The Wall Street Journal based on anonymous Washington sources stating that all sales to the Mainland of the firm’s cutting edge artificial intelligence-capable chips would be restricted.

“We call on both governments to ease tensions and seek solutions through dialogue, not further escalation,” the SIA added, asking parties further, “To refrain from further restrictions until it engages more extensively with industry and experts to assess the impact of current and potential restrictions to determine whether they are narrow and clearly defined, consistently applied, and fully coordinated with allies.”

The same day as Association’s statement, Bloomberg published a piece stating that the CEOs of NVIDIA, Intel, and Qualcomm would be meeting with White House officials, including Lael Brainard, National Economic Council Director and former Vice Chairman of the Federal Reserve, and National Security Adviser Jake Sullivan to discuss avoiding sales-crimping restrictions to China as one of the world’s largest markets.

Bloomberg framed the addition of Brainard and Sullivan as “highlight[ing] the pressure the Biden administration is facing from chipmakers, who worry new restrictions on sales of them and related equipment to China will cut them off from their largest market and ultimately undermine US leadership in the industry.”

None of the trio of companies or the White House would comment or respond to inquiries by Bloomberg on the topic.

The article cited unidentified sources as reiterating that the June foreshadowing was indeed more than just a litmus test when they were paraphrased as stating, “The Biden administration is set to roll out new restrictions in the coming weeks.”

But bigger than the hit on NVIDIA was a blow levied not from Washington, but from the Netherlands.

On July 14, Bloomberg reported that the Dutch government had placed a new set of export controls on ASML Holdings, preventing the company from “from maintaining, repairing and providing spare parts for controlled equipment without government approval.”

ASML Holdings is the industry leader in semiconductor tooling and fabrication equipment.

Sources told Bloomberg that Washington is also expected “to bar ASML from selling even older DUV lithography gear to about half a dozen of Chinese plants without approval from Washington.”

Intel’s role in the conflict was elucidated in a July 12 South China Morning Post article, which said that the company had released a new processor dubbed Gaudi2, which was not (yet) subject to export controls like NVIDIA’s A100 and H100 and Advanced Micro Devices’ MI250.

NVIDIA has been somewhat shirking current export restrictions by selling versions of the A100 and H100 with neutered capabilities to Mainland buyers.

SCMP stated 27 percent of Intel’s revenue came from Mainland China in 2022. The Gaudi2 chipset specifically targets the artificial intelligence industry.

A spokesperson for the National Security Council responded to the SIA’s statement in its own to Bloomberg, saying that the Biden admin’s actions have “been carefully tailored to focus on technology with national security implications, and designed to ensure that US and allied technologies are not used to undermine our national security.”

The economic battle between Beijing and Washington comes on the back of recently revised International Rules Based Order policy requiring member nations to “de-risk” but not “decouple” from China.

The edict has resulted in companies, such as California-based Apple, offshoring an additional 6 percent of its worldwide iPhone production from China’s borders to India’s, although the move did come at the time that the Mainland was still dealing with the ostensible troubles imposed on the economy from the Zero-COVID social credit system.

Broadcom similarly announced at the end of May that it would be producing 5G radio components for the iPhone at its facility in Colorado and not its facilities in China.

In May, President Xi Jinping’s administration hit back, banning national firms from buying memory chips from U.S.-based Micron. By June, Micron was hit with a further security review of its products by the Cybersecurity Administration of China.

After the further clamp on NVIDIA A100 and H100 sales made headlines, the Chinese government also upped export controls on the critical rare earth minerals  gallium and germanium.