Nearly a month after the U.S. announced new export controls on advanced computing and semiconductor equipment destined to China, lawyers and companies are still grappling with what they say is a complex set of regulations and are awaiting clearer government guidance on how and whether their activities are covered. The dense regulations, along with lengthy response times from the Bureau of Industry and Security, have caused firms to delay decisions on shipments until they can better understand their risks and BIS’s due diligence requirements, trade attorneys and industry officials said in recent interviews.
European officials are concerned that a sudden increase in exports of washing machines, refrigerators and other items to Russian neighbors are being used to help the country acquire semiconductors and evade export controls, Bloomger reported Oct. 29. Armenia imported more washing machines from the EU during the first eight months of this year than the last two years combined, the report said, and Kazakhstan imported more than triple the amount of refrigerators through August compared with the same period last year. European officials are concerned some of the items' components may be used by Russia's military, the report said, and have publicly said they have seen parts from fridges in Russian military equipment used in Ukraine.
Germany plans to approve the purchase of Dortmund-based semiconductor company Elmos by Sweden’s Silex, which is a subsidiary of China's Sai Microelectronics, German paper Handelsblatt reported Oct. 28, according to an unofficial translation. Germany’s final decision is expected “within the next few weeks,” the report said, and could “defy” a recommendation from the country’s intelligence ministry, which has warned that the deal could increase Germany’s dependence on China's semiconductor market. An Elmos spokesperson declined to comment.
The Bureau of Industry and Security published its first set of frequently asked questions on its new China-related export controls (see 2210070049), covering the definition of semiconductor “facility” and offering guidance on certain U.S. persons requirements, license review policies and more.
New U.S. restrictions on semiconductor exports to China likely will have a “truly devastating impact” on China’s access to advanced semiconductors within the next three years, the Carnegie Endowment for International Peace said in an Oct. 27 report. Even though China has been expecting the controls and has stockpiled some chips and semiconductor manufacturing equipment, those stockpiles will eventually “dwindle” and the country “will likely be forced to step backward in technological time and use less advanced chips that the industry has long since moved past,” the report said.
Semiconductor company KLA is expecting the U.S.’s new export controls on China (see 2210070049) to hurt its revenue and is looking at moving its products to customers not subject to the restrictions, CEO Rick Wallace said during an Oct. 26 earnings call. The company is preparing for up to a $900 million revenue hit in 2023, but Wallace also stressed the company is uncertain how much its operations will be affected until it receives more guidance from the Commerce Department.
The Bureau of Industry and Security is confident it will soon convince allies to adopt similar semiconductor export controls on China, Undersecretary Alan Estevez said, adding that he expects some type of “multilateral deal” finalized in the “near term.” Estevez, speaking during an Oct. 27 event hosted by the Center for a New American Security, also said BIS isn’t “done” imposing chip-related controls and said companies should expect new restrictions on emerging technologies, including on biotechnologies, artificial intelligence software and items in the quantum sector.
Samsung and SK Hynix view their one-year waiver from certain U.S. export license requirements (see 2210070049) as a deadline and have begun exploring a “Plan B” if they can’t produce certain chips in China, Nikkei reported Oct. 25. After the South Korean chipmakers received a Bureau of Industry and Security waiver to continue using controlled semiconductor equipment in China (see 2210120002), they also “started a campaign to assess the business risks of their operations in China, as well as to plan for different scenarios,” the report said. "Who knows what will come after one year? It might or might not be extended," a person familiar with Samsung’s situation told Nikkei. "The license can be [denied] so that the company could face a case-by-case review." SK Hynix also told Nikkei it’s unsure what will happen after the one-year period ends.
The Bureau of Industry and Security recently sent a proposed charging letter to Seagate Technology alleging that it violated U.S. export controls by providing controlled items to a company on the Entity List. Seagate said the Aug. 29 letter accused it of violating the Export Administration Regulations by providing hard disk drives to the blacklisted company and its affiliates between August 2020 and September 2021.
Although the new U.S. export controls against China are likely to have minimal impacts on the U.S. semiconductor industry, a broader implementation of the controls could quickly raise costs on U.S. and allied suppliers and hurt the domestic chip industry, the Rhodium Group said in a report this month. The research firm said damages to semiconductor companies “could balloon quickly under a tightening of controls,” which it believes is “highly plausible.”