The USA is considering additional sanctions on 200 semiconductor companies in China - HBM is also subject to regulation.

The Biden administration is preparing new sanction measures against China's semiconductor industry. According to an email to members of the US Chamber of Commerce, it is expected that approximately 200 Chinese semiconductor companies will be newly added to the trade restriction list. Additionally, export restrictions on high-bandwidth memory (HBM) essential for artificial intelligence development are also under consideration.

The US Department of Commerce has solidified its policy to announce details of new regulatory measures before the Thanksgiving holiday (November 28). At the core of the regulation is the addition of approximately 200 Chinese semiconductor-related companies to the trade restriction list. US companies will generally be prohibited from exporting specific technologies or products to the companies listed on this list.

Further noteworthy is the additional regulatory package scheduled for December. This package includes export restrictions on high-bandwidth memory (HBM), essential for artificial intelligence (AI) development. HBM is known as an essential component for developing advanced AI systems such as large-scale language models. This regulation is expected to be introduced as part of a broader set of regulations related to artificial intelligence.
According to sources, the first round of regulations is highly likely to include restrictions on the shipment of semiconductor manufacturing equipment to China. This aligns with the contents of an email sent to members by the US Chamber of Commerce. This development is seen as an expansion of the 'plan to add about 120 Chinese companies to the trade restriction list' reported by Reuters in July, highlighting the Biden administration's stance on strengthening technology regulations on China.
These measures are positioned as part of the US strategy to incrementally strengthen pressure on China's semiconductor industry. By specifically targeting semiconductor manufacturing equipment and HBM, two crucial elements, it is expected to simultaneously impose constraints on both China's semiconductor industry and AI development. Regarding these regulatory measures, both the US Department of Commerce and the US Chamber of Commerce have refrained from commenting in response to Reuters' inquiries.

These new sanction measures are expected to have a multi-layered and long-term impact on China's semiconductor industry. Particularly affected will be China's pursuit of semiconductor self-sufficiency (chip autarky). Chinese companies are required not only to establish their own chip design capabilities but also to manufacture them domestically, facing new constraints on these dual challenges.
Specific impacts are already beginning to emerge in the development plans of major technology companies in China. A symbolic example is Huawei's next-generation product development. Due to SMIC, their manufacturing partner, being unable to procure cutting-edge EUV (extreme ultraviolet) lithography equipment, it is anticipated that Huawei's Kirin SoCs and Ascend AI accelerators will be limited to manufacturing on the 7nm process until 2026, vividly illustrating the technological limitations facing China's semiconductor industry.

A more severe challenge lies in the export restriction of High Bandwidth Memory (HBM). HBM is a crucial component that determines processing speed and efficiency in modern AI systems. This regulation is expected to directly impact China's AI development capabilities, posing a significant barrier in the development of data-intensive AI applications such as large-scale language models and image recognition systems.
Looking at the global situation, even giant companies like Intel and Samsung find it difficult to completely internalize both chip design and manufacturing. In fact, Intel is in a situation where it has to outsource the manufacturing of its latest Arrow Lake and Lunar Lake products to TSMC. This reality underscores the scale of the challenges China is facing. While Chinese companies are compelled to manufacture domestically with domestic companies like SMIC, the utilization of EUV technology has become virtually a prerequisite for manufacturing processes beyond 7nm.

In this scenario, for China's semiconductor industry to maintain world-class competitiveness, independent technological innovation is essential. Particularly to achieve manufacturing processes of 5nm or less, the development of innovative approaches to replace EUV technology is necessary, requiring substantial research and development investment and time. Thus, these new sanction measures are expected to act as a composite constraint on China's semiconductor industry development in terms of technology, time, and economy.

November 26, 2024