US Export Ban On China - What Will Be The Effects?

 

Increasing restrictions on the export of chipmaking equipment to China is a deliberate effort by the U.S. Consequently, domestic chipmaking equipment suppliers are replacing export companies as a result of the U.S. seeking corporations with nations like Japan and the Netherlands.

Japan and the Netherlands seek assistance from the United States

Although the U.S. has not gained the absolute support of other countries to hinder the tech sector of China through severe export restrictions, Washington is firm enough to make unilateral efforts to sabotage China's tech ambitions. On January 27, 2023, the U.S. made a deal with Japan and the Netherlands to gain their support in tightening restrictions on semiconductor manufacturing equipment exports.

ASML and Nikon, Dutch and Japanese firms, provided immersion lithography machines. A report indicates that the Biden administration is considering suspending Huawei from all U.S.-developed technology and exports. Washington has also halted the approval of export licenses.

Restrictions and their Impacts

In order to maintain its leadership in the technical sector, the Biden administration imposed heavy restrictions on semiconductor chip exports to China. US semiconductor firms are forbidden from selling or exporting chips produced with US semiconductor technology to China in accordance with the sanctions. Also prohibited are citizens, green card holders, and residents from working in chip companies owned by China under Washington's rules.

What is the reason for the restrictions on China?

A historic trade act named the ‘US-China Relations Act of 2000’ was signed by the then President of the U.S., Bill Clinton, in 2000. This Act permitted Beijing to establish permanent normal trade relations with the U.S., which resulted in a massive trade rise of $231 billion a year, propelling China into the global leader in manufacturing.

Beijing's aptitude for making cutting-edge technology has now surpassed even that of the U.S., leaving the Biden administration looking for ways to challenge its power on the geopolitical stage. As high-tech chips are necessary for gradually upgrading military technology, Washington has imposed restrictions on exports. Ironically, this may provide a boon to Chinese suppliers of equipment needed for chip fabrication.

Suppliers from China

In China, the only semiconductor manufacturing lithography company, Shanghai Micro Electronics Equipment (SMEE), produces machines capable of manufacturing chips up to 90 nm. It is sufficient to use these devices to produce low-end power management chips. Although it is the only effective competitor to ASML Holding NV, a global leader in lithography machines, it remains incompetent when compared to ASML or its Japanese competitors.

Naura Technology Group Co., Ltd. is a Chinese alternative to chip equipment manufacturing. The company manufactures etching devices as a replacement for Lam Research Corp.(LRCX.O), Applied Materials Inc. (AMAT.O), and Tokyo Electron Ltd. (8035.T). Additionally, their deposition machines work with silicon wafers in the chip-making process through chemical and gas techniques. While their equipment can cope with 55nm and 28nm chip development, they are still lagging behind the world's top firms in this domain.

Naura, a Chinese company, is a contender of the American tech giants Lam Research and Applied Materials. Although its market share is not as large as theirs, it still managed to produce $444.9 million in 2021. This accounted for 2.5% of Applied Materials' total revenue for that year. In addition to this, Naura specializes in 5 nm chip-making technology and etching equipment which remove excess material from silicon wafers.