Biden Administration Hits China With New Limits on Access to Advanced U.S. Semiconductors

In a bid to block China from acquiring cutting-edge technology that would accelerate Beijing’s military modernization, the Biden administration imposed further limits on the export of semiconductors and the equipment necessary to produce them. This marks the administration’s third round of new restrictions in as many years.

The latest rules limit the sale of high-bandwidth memory chips and require U.S. firms to vet Chinese partners more carefully to ensure they are not diverting technology to China’s armed forces. The administration also announced the addition of 140 Chinese firms to the Commerce Department’s Entity List, blocking their access to U.S. technology. The newly listed firms are involved in the production, purchasing, and financing of semiconductors.

New Rules Build on Restrictions From 2022 and 2023

The new regulations build on the administration’s previous efforts to prevent China from accessing advanced semiconductors used to develop AI and other critical technologies. In October 2022, the administration restricted the export of semiconductors capable of handling the computations used to train and deploy large-scale AI systems. These regulations also limited the sale of semiconductor manufacturing equipment and their components, cutting off Chinese firms from constructing their own competing devices. These restrictions were further tightened in October 2023, as the administration extended export controls on a larger segment of AI-related semiconductors, including Nvidia’s powerful A800 chip, which was designed to circumvent previous restrictions.  

Beijing Funds Domestic Chip Industry in Hopes of Ending Reliance on Western Technology

The latest restrictions come as China attempts to strengthen its domestic semiconductor industry, aiming to wean itself from dependence on foreign technology and, ultimately, to compete with the United States and its allies for technological dominance. In May, Beijing launched a $47.5 billion state investment fund to support its domestic semiconductor industry, consistent with its pursuit of self-reliance. Greater self-reliance would ensure that China can continue to produce a range of high-tech weapons systems that require access to advanced semiconductors even if Washington and others further restrict their exports.

However, despite these efforts, China continues to rely heavily on foreign suppliers for key components. Chinese firms remain the largest customers of Dutch-based firm ASML, a key producer of advanced semiconductor manufacturing equipment. China is also a major customer for leading Japanese semiconductor equipment supplier Tokyo Electron, with Chinese buyers accounting for nearly half of its 2024 revenue. Moreover, Chinese domestic manufacturers have recently been stockpiling semiconductors in anticipation of further U.S. restrictions, with Chinese purchases of American chips reaching $1.11 billion in October, a 60 percent increase from the same period last year.

The United States Must Work With Allies to Align Restrictions

The latest export controls represent a clear step forward, but much tighter restrictions will be necessary to restrict China’s military modernization. Given China’s continued reliance on foreign suppliers, Washington must work closer with its allies, particularly Japan and the Netherlands, to rapidly bring their respective export controls into alignment with U.S. policy. In doing so, the United States can cut off any potential backdoors for Chinese firms to access advanced production equipment and eliminate any opening for Beijing to expand its stockpiles. Moreover, the United States should expand its targeting of upstream inputs for China’s semiconductor industry, particularly design software and raw materials used in the manufacturing process.

Jack Burnham is a research analyst in the China Program at the Foundation for Defense of Democracies (FDD). For more analysis from Jack and FDD, please subscribe HERE. Follow Jack on X @JackBurnham802. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.