Tech war: new US chip sanctions to deal fresh blow to China’s self-reliance push

China’s semiconductor industry is bracing for new shocks, as the US prepares to add several major chip equipment and materials suppliers on the mainland to its trade restriction list, dealing a fresh blow to the country’s push for technological self-reliance, according to two people familiar with the matter.

Several chip fabrication plants and manufacturing partners of Huawei Technologies, which has been under US sanctions since 2019, will be among roughly 200 Chinese companies included in the updated export controls to be announced later this week or early next week, the sources said.

Washington’s move is expected to also affect venture capital firms with close ties to the Chinese semiconductor sector, as well as upstream companies such as special gas suppliers, according to one of the people who was briefed on the situation, but declined to be named because of the sensitivity of the matter.

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The US Commerce Department’s Bureau of Industry and Security declined to comment on Wednesday. China’s foreign ministry spokeswoman Mao Ning condemned the planned US trade curbs and said Beijing would take resolute measures to defend mainland business interests.

Several manufacturing partners of Huawei are expected to be added to the updated US export controls. Photo: Reuters alt=Several manufacturing partners of Huawei are expected to be added to the updated US export controls. Photo: Reuters>

The new sanctions are set to mark a major escalation in the US-China tech rivalry since October 2023, when the Biden administration tightened its export restrictions introduced in 2022 targeting the mainland’s semiconductor industry, citing concerns that advanced technology could be used to enhance Beijing’s military capabilities.

The update last year was aimed chiefly at slowing China’s artificial intelligence (AI) development by limiting the nation’s access to advanced AI chips from Nvidia and lithography systems from world-leading Dutch supplier ASML.

One of the sources said the impact on the Chinese chip industry would be significant if major suppliers are blacklisted by the US.

The mainland has been striving for self-sufficiency in its semiconductor supply chain to counter US sanctions. But while the nation has developed domestic alternatives for some of the less-advanced chipmaking equipment, it remains heavily dependent on imported high-end tools like lithography systems and electron-beam inspection systems.

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