Chip War turns to personnel

Business news | October 16, 2022

By Nick Flaherty

The US has imposed key restrictions on US engineers working with lithography equipment in its trade battle with China.

While it is further restricting the shipment of high performance chips such as GPUs from Nvidia and AMD and CPUs from Intel and AMD for supercomputers that can be used for military purposes, it has also imposed restrictions at short notice on US staff working in fabs in China.

Imposed with two days notice by the Department of Commerce’s Bureau of Industry and Security (BIS), these restrictions have hit European lithography equipment supplier ASML as well as its US competitor Lam Research. Fab equipment needs to run 24 hours a day, seven days a week, so any downtime in equipment hits production. Pulling lithography support engineers out of Chinese fabs will significantly hit productivity.

“The US government issued a new set of regulation prohibiting support to certain fabs in China by US persons. As a result, ASML US employees, including US citizens, green card holders and foreign nationals who live in the US are prohibited from providing certain services to advanced fabs in China,” Yu Cao and David Kim of the US management team at ASML told staff.

This means US employees must refrain, either directly or indirectly, form servicing, shipping, or providing support to any customers in China until further notice. The company is actively assessing which fabs are affected. Lam Research is reported to have pulled all its support staff out of Chinese fabs.

This is part of a continuing trade battle with the People’s Republic of China (PRC) over semiconductor technology, dubbed the ‘Chip War’.

“The PRC’s assertiveness at home and abroad is advancing an illiberal vision across economic, political, security, and technological realms in competition with the West. It is the only competitor with both the intent to reshape the international order and the growing capacity to do it,” said National Security Advisor Jake Sullivan on the Biden-⁠Harris Administration’s National Security Strategy.

“Last week we launched significant, carefully tailored restrictions on semiconductor technology exports to the PRC, focused on advanced semiconductor manufacturing tools, the most advanced chips, and supercomputing capabilities,” he said.

“These restrictions are premised on straightforward national security concerns,” he said. “These technologies are used to develop and field advanced military systems, including weapons of mass destruction, hypersonic missiles, autonomous systems, and mass surveillance.”

Those other restrictions come in next week.

“We are appropriately doing everything in our power to protect our national security and prevent sensitive technologies with military applications from being acquired by the People’s Republic of China’s military, intelligence, and security services,” said Under Secretary of Commerce for Industry and Security Alan Estevez.

“The threat environment is always changing, and we are updating our policies today to make sure we’re addressing the challenges posed by the PRC while we continue our outreach and coordination with allies and partners,” he said.

“The PRC has poured resources into developing supercomputing capabilities and seeks to become a world leader in artificial intelligence by 2030. It is using these capabilities to monitor, track, and surveil their own citizens, and fuel its military modernization,” said Assistant Secretary of Commerce for Export Administration Thea Rozman Kendler. “Our actions will protect U.S. national security and foreign policy interests while also sending a clear message that U.S. technological leadership is about values as well as innovation.”

More Chinese companies may be added to US lists of restricted companies as a result.

“Where BIS is prevented by a host government from conducting our end-use checks in a timely manner, we will add parties to the Unverified List, and if the delay is extreme enough, the Entity List, to prevent the risk of diversion of any U.S. technology that could undermine our national security interests,” said Matthew Axelrod, Assistant Secretary of Commerce for Export Enforcement.

The latest restrictions add new license requirements for items destined to a semiconductor fab in the PRC building advanced devices, which is a focus on lithography systems. There will be a “presumption of denial” for Chinese fabs, and facilities owned by multinationals will be decided on a case-by-case basis.

This will cover Logic chips with non-planar transistor architectures (i.e., FinFET or GAAFET) of 16nm or 14nm, or below, as well as DRAM memory chips of 18nm half-pitch or less and NAND flash memory chips with 128 layers or more and come into force on October 21st.

The new regulations also restrict the ability of US staff to support the development, or production, of ICs at certain PRC-located semiconductor fabs without a license and this came into force on Thursday.

Chris Miller, Associate Professor of International History at the Fletcher School of Law and Diplomacy at Tufts University, has written a book on the ‘Chip War’, covering the history of Silicon Valley and the increasing importance of semiconductor technology and the foundry model in Taiwan, including ASML’s acquisition of laser maker Cymer in California. The end chapters look at the political factors of the semiconductor battle with China.

Chip War: The Fight for the World’s Most Critical Technology

www.asml.com; www.commerce.gov;