Semiconductor Industry Is Questioning U.S. Export Controls

U.S. Commerce Secretary Wilbur Ross is about to sign off on changes to export controls on the sale of some semiconductors and other high-tech gear to China. In response, nine industry groups — including the Semiconductor Industry Association, the National Foreign Trade Council, and SEMI — urged him to allow for public comment and stressed the role semiconductors play in “the functionality in advanced medical equipment used by health professionals to treat the public,” the latter a reference to COVID-19.

Reuters reports that, last week, “senior U.S. officials agreed on new ways to control high-tech exports to China … aimed at preventing China from obtaining advanced U.S. technology for commercial purposes and diverting it to military use.” Those same officials also “agreed to require foreign companies that use U.S. chipmaking equipment to obtain licenses before supplying certain chips to China’s Huawei Technologies.”

The New York Times reported on the impact of that decision. At the time, one source said that, “the rule-change is aimed at restricting the sale of sophisticated chips to Huawei and not older, more commoditized and widely available semiconductors.” Trade attorney Doug Jacobson commented that the move would “have a far more negative impact on U.S. companies than it will on Huawei, because Huawei will develop their own supply chain.”

Last Friday, SEMI president Ajit Manocha sent a letter to President Trump, warning him that the trade changes would “harm U.S. exports of chipmaking equipment, which bring in over $20 billion a year” and that the new rules could potentially create uncertainty for supply chains “critical to fighting the COVID-19 pandemic.”

In addition to the “equipment rule change,” the U.S. officials “also decided to eliminate an exception that allows certain U.S. technology to be exported without a license to non-military entities for civilian use; force foreign companies re-exporting certain U.S. goods to China to seek approval not only from their own governments, but from the United States as well; and stop China’s military from obtaining certain items without a license even if for civilian use.”

In response, China foreign ministry spokeswoman Hua Chunying urged the U.S. to “do more for the cooperation between our two sides.” Huawei also stated that, in retaliation, the Chinese government could restrict “sales of American products in China” and shift “to alternative suppliers in China and South Korea.”