Regulatory intelligence for US exporters

US Should Limit China's Access to Semiconductor Equipment Through Stricter Export Controls, Experts Say

The U.S. should impose stricter export controls on advanced semiconductor manufacturing equipment to prevent China from indigenizing semiconductor technologies, technology policy experts said. If the U.S. and allies successfully block China from importing and developing specialized software and advanced chips, they should then impose end-use and end-user controls to allow shipments only for civilian uses in China, the experts said.

The success of U.S. export controls, however, is dependent on cooperation with allies, said Carrick Flynn and Saif Khan, research fellows with Georgetown University's Center for Security and Emerging Technology. Speaking during the Commerce Department’s July 29 Information Systems Technical Advisory Committee meeting, both said the U.S. should only pursue multilateral controls.

“Doing this without full buy-in from all partners is going to be worse than doing nothing at all,” Khan said. “That always has to be an overriding principle when we think about any of these controls.”

In order for the controls to work, the U.S. most likely needs to convince several allies to follow through with the restrictions, including Japan, the Netherlands and South Korea, Flynn said. “If democracies maintain exclusive production control over these chips, they can impose very narrow end-use and end-user export controls that can circle out the Chinese government but include Chinese civilian uses,” he said. “But I think we need to be very careful when we do anything that might interfere with [U.S.-China] trade or the dynamics of it, and we should use precision with export controls.”

The U.S. could also craft stricter export controls to prevent companies from providing repair services to China, Khan said, further restricting China’s ability to indigenize advanced technologies. Khan said he predicts China needs “at least a decade” to develop industry-leading advanced semiconductor manufacturing equipment.

If the U.S. follows this route, there will likely be “unavoidable near term revenue losses” for semiconductor and other advanced technology exporters, Khan said. But he said the U.S. can mitigate some of those losses with legislation, pointing to a Senate bill that proposes federal support and tax credits for the semiconductor industry (see 2007240010). “There are some risks,” Khan said.

Flynn suggested the U.S. likely needs to take risks to prevent China from becoming the world’s leader in advanced technology development. “We do not want the Chinese government to have access to advanced computer chips,” he said. “An [artificial intelligence] arms race, or a hypersonic missile arms race, or any other technology arms race is not in the best interest of the United States or global security.”