Welcome everyone to another edition of my China Tech Law Newsletter. If you've been a regular reader of this blog, first of all, thank you! Second, you might have caught an earlier post I did on working with Chinese semiconductor companies as clients.
As part of my real life work and my virtual life here on Linkedin, I don't ever try to put myself forward as an expert on US export controls, and particularly how they relate to Chinese semiconductor companies these days. It's a very technical field largely concentrated in and around K Street in Washington D.C., filled with practitioners who themselves used to work in the US government and have a finger on the pulse of how the Executive Branch means to implement rules like these when they come out. But I do certainly need a basic understanding of how these rules work and the effect on the industry here in general.
Over the last few years, the US Department of Commerce (DOC) has been putting out more and more stringent rules on restricting access by Chinese semiconductor companies to US technology. Each new set of rules feels like a slight ratcheting up of the pressure, but from everything I can see and hear on the ground here, the new rules which came out from the DOC's Bureau of Industry and Security last week feel very different. A different level of ratcheting up.
I could try to summarize and explain the implications of the rules but I don't think I could do any better job than my good friend Stewart Randall at Intralink did here:
https://www.intralinkgroup.com/en-GB/Latest/Blog/October-2022/What-the-latest-US-restrictions-on-China-mean
The new rules require a license (exemption) for activities of "U.S. persons" that "support" the "development" or "production" of certain integrated circuits (chips) in the PRC.
Many Chinese semiconductor companies have key personnel who are overseas returnee Chinese with US passports - those who were born and grew up in China but whose advanced education and formative career years were spent in the US. Many Chinese companies have overseas headquarters, but the bulk of their work is done here in China. And most multinational semiconductor companies of any size will have a significant China R&D team and of course, a large customer base here.
Not surprisingly, the rules are creating more questions than answers at the moment. It feels a bit like that time a couple years ago when Wechat was supposed to be banned in the US.
What part of the value chains will be covered this time? Fabrication, fabless design, eDA design software tools, other equipment providers, etc.?
As Stewart asks, will licenses be given out liberally as in the past? Again, this looks and feels different this time. Particularly by the restrictions on US persons instead of just corporate entities.
We should get more clarity in the coming weeks, and look forward to a follow-up post here on this blog when we do. See you back here again in 14 days!
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