Expert Calls on US to Further Facilitate Sales of Chips for Civilian and Commercial Uses in China

An employee examines chips at the Jiejie Semiconductor Company in Nantong, in Jiangsu Province, China, on March 17, 2021. STR/AFP via Getty Images

An expert has called on the U.S. government to further facilitate sales of U.S.-made chips for civilian and commercial uses in China.

Last October, the U.S. government issued new export controls (pdf) that block U.S. companies from selling advanced semiconductors, and the equipment used to manufacture them, to some Chinese manufacturers unless a special license is obtained. In December, the government expanded these restrictions to 36 additional Chinese chip makers.

Washington has also effectively prohibited U.S. citizens from supporting the production or development of chips covered under the restrictions. U.S. nationals participating in Chinese chip-related companies will either have to quit their jobs or give up citizenship.

Early this week, Reuters reported that the U.S. Commerce Department took a step further by releasing proposed rules to prevent $52 billion in semiconductor manufacturing and research funding from being used by China and other countries deemed of concern.

The proposal limits recipients of U.S. funding from investing in the expansion of semiconductor manufacturing in foreign countries such as China and Russia and limits recipients of incentive funds from engaging in joint research or technology licensing efforts with a foreign entity of concern.

It also classifies some semiconductors as critical to national security, defining them as not considered legacy chips and subject to tighter restrictions. This measure covers chips “including current-generation and mature-node chips used for quantum computing, in radiation-intensive environments, and for other specialized military capabilities.”

Stephen Ezell, Vice President, Global Innovation Policy at the Information Technology and Innovation Foundation, said that the Biden administration is undoubtedly correct in making it difficult for the Chinese military to acquire very advanced chips that can support the objectives of its government and military and national security affairs.

“The whole intent of the export controls have been to limit the ability of these technologies to enhance China’s military wherewithal,” he noted.

However, he said, “We should be trying to ensure that we can keep channels available for chips made here to be sold for civilian and commercial uses in China,” as 36 percent of the global semiconductor market is in China.

“It’s very important that policymakers really try very hard to make distinctions between the end uses and users of semiconductor chips in China, which actors are consuming these chips for what purposes,” he recently told the ‘China in Focus” host on NTD, the sister media outlet of the Epoch Times.

He further stressed the importance of drawing “a distinction between chips that are going into refrigerators or cars versus chips that are going to fund hypersonic weapons or modeling nuclear explosions.”

“If we are on a completely wholesale basis, make it not possible for companies to sell commercial civilian chips in China, then that deprives companies of the opportunity to earn revenues they need to reinvest in future generations of products,” he said.

Ezell cited the case of Nvidia, the U.S. company that modified the chip down to the H 800 to replace the A100 added to the export control list by the U.S. Commerce Department.

“They reduced their chip data transfer rate to about half the rate of their flagship H 100 chip, so it’s not as capable or sophisticated,” he said.

Deleterious Dependence on Taiwan-Made Chips

Ezell noted that 92 percent of the world’s most-sophisticated semiconductors are manufactured in Taiwan.

He raised concern that the United States might lose access to that source if Beijing moves against the self-governing island and war breaks out.

He pointed to the study, which estimates that a hypothetical one-year disruption of the Taiwanese semiconductor supply would cost global electronic device manufacturers $500 billion.

“I think certainly, it was a consideration for U.S. policymakers that should events come to pass that were to make the U.S. unable to rely on the supply of chips coming off the island of Taiwan. That would be certainly very deleterious to the U.S. economy and national security capacity.”

Reuters and Alex Wu contributed to this report.