US tightens advanced chip export controls on China

Background

On 7 October 2022 the US Bureau of Industry and Security (BIS) issued export controls on advanced computing chips. On 17 October 2023 BIS released three rules that updated the controls first issued a year earlier^[1]. The new package kept the overall structure of the earlier measures, but changed the technical yardstick used to decide which chips need a licence and added licensing requirements aimed at closing routes around the controls^[1][2].

What happened

The package had three parts^[1][2]. The first was an interim final rule covering advanced computing and supercomputing items. The second was an interim final rule on semiconductor manufacturing equipment, the machinery used to make chips. The third was a final rule adding entities to the Entity List, the US roster of foreign parties that face licensing requirements when they buy controlled American items^[2].

Key details

Chip parameters. The advanced computing rule dropped interconnect bandwidth as a parameter for identifying restricted chips. Instead it restricted exports of chips that exceed either the performance threshold already used in the earlier controls or a new performance density threshold^[1][2]. Interconnect bandwidth measures how fast data moves between chips; performance density relates computing power to the area of the chip. Under the new test, a chip can be caught either because its raw performance is high enough or because it packs enough computing power into a given area^[1][2].

A new licence exception. BIS created License Exception Notified Advanced Computing. Under it, the US government decides within 25 days whether a notified shipment may proceed under the exception or instead needs a licence^[2]. The mechanism gives exporters a defined window in which a shipment is reviewed rather than leaving the outcome open.

Rules tied to headquarters. The rule imposed a worldwide licensing requirement on companies headquartered in Macau or in arms-embargoed destinations, including China, or whose ultimate parent company is headquartered in those places. The stated purpose was to stop such companies from buying controlled chips through subsidiaries registered abroad^[2].

More than 40 countries. It also added licence requirements for exports to more than 40 additional countries that BIS regarded as presenting a heightened risk of diversion to China^[2].

Entity List additions. BIS added 13 Chinese entities to the Entity List and applied footnote 4 designations to them^[2]. Chinese state media reported that the additions included the Chinese chip designers Moore Threads and Biren Technology^[3].

Timing

The advanced computing rule took effect on 16 November 2023, and carried a 60-day comment period^[1].

Why it matters

Commerce Secretary Gina Raimondo said the updated rules would increase the effectiveness of the controls and further shut off pathways to evade them^[1]. BIS said the controls kept a clear focus on military applications and on the risks it associates with China's military-civil fusion strategy^[1].

Taken together, the three rules worked on several levels at once: they redefined which chips are restricted, extended licensing requirements to the equipment that produces chips, attached obligations to companies according to where their headquarters and ultimate parents sit, and named specific firms on the Entity List^[1][2][3]. Because the two interim final rules were issued in interim form, the technical thresholds and licensing arrangements they set out remained open to comment after publication^[1].