The Biden administration is intensifying its crackdown on Chinese firms to curb the country’s technological advancements, mainly the use of advanced chips in military applications. The U.S. added China’s top memory chip maker Yangtze Memory Technologies Corp. (YMTC) and over 30 other firms to the entity list, which implies that American companies will have to obtain a license from the Commerce Department before selling any goods or services to the companies in this list.
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YMTC was added to the list over concerns that it could direct American technology to already blacklisted Chinese tech behemoths Huawei Technologies Co. and Hikvision. YMTC has rapidly emerged as a key rival to American memory chipmaker Micron Technology (MU) and South Korea’s SK Hynix. As per a Nikkei Asia report in October, Apple (AAPL) put on hold its plans to use YMTC’s memory chips in its products due to tighter export controls.
Overall, the export blacklist includes 35 Chinese companies (including artificial intelligence (AI) chipmaker Cambricon Technologies and IT giant CETC) and a Japan-based subsidiary of YMTC.
In October, the Commerce Department had placed YMTC and several other Chinese companies in what it called an unverified list. The Department said that it would move these companies to the entity list if it is unable to confirm that the end uses of their products weren’t detrimental to the U.S. The Commerce Department has now removed 27 companies (per Reuters) from the unverified list after completing site visits in cooperation with the Chinese government.
Escalating U.S.-China Trade Tensions
Amid growing tensions between the U.S. and China, both countries intend to invest billions of dollars to boost the domestic production of advanced chips. In October, the U.S. imposed new export controls to restrict China’s access to advanced chips. China has officially initiated a trade dispute against the U.S. at the World Trade Organization (WTO) over the chip export curbs. It has alleged that the U.S. curbs “threatened the stability of the global industrial supply chains.”
Meanwhile, some American chipmakers are exploring ways to avoid significant loss of sales due to the recently imposed export restrictions. Last month, semiconductor giant Nvidia (NVDA) started offering an alternative chip (A800) with a lower bandwidth that meets the newly imposed U.S. export rules. The A800 is an alternative to Nvidia’s A100 chip that was used in servers and AI applications by many Chinese tech giants, including Alibaba Group (BABA) and Tencent Holdings (TCEHY).
Recently, the WTO ruled against the U.S. tariffs imposed on steel and aluminum imports by former President Donald Trump as they violated international trade laws. The U.S. said that it strongly rejects the WTO panels’ “flawed interpretation and conclusions.” China has urged the U.S. to respect the ruling and work with WTO members to protect the multilateral trading system.
Overall, any further worsening of the U.S.-China relationship could adversely impact companies in the two countries, especially at a time when businesses are already under pressure due to a looming global recession.
