THREAD: The US Commerce Department just dropped 100+ pages of new export control regulations that will reshape the global semiconductor industry and the future of the US-China relationship.
Here are the important takeaways you need to know, pulling from an interview I did with Kevin Wolf, former senior BIS official in the Obama administration and perhaps America's foremost export controls expert.
Key points:
- New regs redefine scope of controls to address inherently commercial items, mainly as a response to Chinese civil-military fusion;
- US is treating export controls on China as an emergency, but targeted regs are not a decoupling agenda;
- Multilateral > unilateral in the export-control world, but getting allies onboard is a hard sell;
- America has to keep up R&D investment in order to not lose out to foreign companies as controls take effect.
The biggest policy innovation these new regulations achieve is in going back up the food chain and redefining the relationship between items and their potential military applications.
You're no longer regulating based on whether something operates at a particular capability or frequency, or is radiation-hardened...

Instead, the fact that advanced computing capabilities are foundational to military modernization was enough to justify export controls.
The reasoning behind this shift is largely due to China's civil-military fusion. US NatSec is responding to China's pursuit of strategic dominance in economic sectors that are also critical for military modernization.

Thus, these new regs will inevitably target commercial items.
From this week on, any of the inputs, tools, technology/software, and services in support of advanced node semiconductor manufactoring or advanced computing are now subject to some form of regulation — as in, a license from the US government is required.
Interestingly, Jake Sullivan's team skirted around some legal technicalities in order to go forward without the notice-and-comment process, so that the regs can take effect immediately.
They were probably worried that given a heads-up, you'd see stockpiling, decreasing the regulations' ultimate impact.
That being said, it's not a decoupling agenda whole-hog.

The regs mostly avoid affecting global supply chains of mature node semiconductors and other widely-available commercial items, which is where most of the money still is.
Advanced node and high-end computing are the target.
However, these regs are unique in being China-only controls.

Most export controls, like the ones on WMD, exist due to the inherent nature of the item.

In a rare exception, this time USG is explicitly targeting supercomputers and advanced chips because of geopolitical concerns.
Controls now apply when sending items of any sort to a integrated-circuit fab in China whose production meets one of three criteria:

1. Logic that's either nonplanar or has a smallest feature size under 16nm;
2. Dynamic random-access memory (DRAM) with a smallest feature size under 18nm;

3. Producing or developing NAND flash memory.

Compliance-wise, US persons must either get licensed, or confirm that their export to China isn't for these purposes.
The regs also expand the unverified list: Chinese firms can now end up there if they don't allow US gov to do onsite verification or facility inspections.

Exporting a company on the unverified list requires a lot more certifications, and license exceptions no longer apply.
Chinese companies can now "graduate" from the unverified list to the entity list if US government requests for site visits are not satisfied in 60 days, which then leads to broad sweeping bans on any export from the US to these firms.
Though the US Commerce Department is the only export control org on earth with subject matter experts as enforcement agents, only 2 agents on the ground to do inspections and site visits in China.
Will smuggling be a problem? Almost certainly: enforcement involving foreign-made commercial items is extraordinarily difficult.

The US's next priority is to get the word out across the world, and particularly to allies, that there will be serious consequences for violations.
Allies have to be onboard for solid enforcement, but they might also take advantage of the market gap.

In the short term the regs will almost certainly be very effective, because US tech is widely used worldwide for supercomputer and advanced node chip production...
... Long-term, however, foreign companies who want to skirt US compliance may be able to design out American tools.

Giving up the China market is a much tougher sell abroad, since other countries often depend on China sales heavily — China revenues also fund their own R&D.
In a sense, Sullivan et al. are betting that America's R&D will run fast enough to keep expanding the technology gap.

Because if the bet fails, these controls will allow non-US companies to achieve advantages that they wouldn't have otherwise.
CHIPS, subsidization of STEM education, and domestic production subsidies are all part of the bet.

Or as Kevin Wolf put it, "You can't just export-control yourself into a healthy economy."
The Department of Commerce will also need to train a very large cadre of enforcement agents in order to investigate companies and their compliance programs.
What about human rights? Part of the motive for these controls is that advanced node items can be used for human rights violations, but so far it's mostly talk.

Perhaps there's more to come, but human rights concerns were generally missing from Friday's regs.
Read the interview in full and subscribe to ChinaTalk:…
And thanks to @irenearz for help with this thread!

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More from @jordanschnyc

Oct 14
Any Chinese company that survives is a company that hasn’t been fully sanctioned yet;

Any fully sanctioned Chinese company is 100% doomed; there’s no possibility of survival.

American citizens and permanent residents will predictably vote with their feet."
FWIW, while I think there is certainly a grain of truth in this thread, the impact into the medium term may be a bit overstated.

My guess is that companies like LAM out of an abundance of caution paused servicing in order to make sure they were complying with the law.
The regs, after all, are not intended to stop US firms from working in China behind the cutting edge, and if that is their impact they may be tweaked in the coming months.
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Oct 14
THREAD: The US government's new export controls are wreaking havoc on China's chip industry.

New rules around "US persons" are driving an "industry-wide decapitation."
The following is the translation of a thread posted earlier this week by @lidangzzz.

"Lots of people don’t know what happened yesterday.

To put it simply, Biden has forced all Americans working in China to pick between quitting their jobs and losing American citizenship.
Every American executive and engineer working in China’s semiconductor manufacturing industry resigned yesterday, paralyzing Chinese manufacturing overnight.

One round of sanctions from Biden did more damage than all four years of performative sanctioning under Trump.
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Oct 13
Livetweeting the BIS webinar on the new export regs

currently people are speaking chinese in the background what the hell is going on...…
@patrick_lozada wtf is this
@patrick_lozada 没有声音 some dude is saying
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The CCP's top science official is scared for the future of S&T in China.

ChinaTalk translated key excerpts from his recent speech on why he thinks the US has a good shot at containing China's tech rise
China Assoc. of Science and Technology (CAST) is the umbrella professional org for S&T workers. Primarily, it maintains CCP presence in China's STEM sectors.

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Zhang says that US containment is hurting China in 5 ways:

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What happens if Taiwan's semiconductor ecosystem goes dark?

Instant recession with 🚨🚨double digit drops in global GDP🚨🚨.
The world is *profoundly* dependent on Taiwan's chips:

- TSMC makes ~50% of all global semiconductors;

- Taiwan owns 60% of global foundry revenue — TSMC alone has 54%;

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Beyond TSMC, Taiwan's semiconductor industry is also responsible for:

- 22% of global materials,

- 20% of wafer fabrication,

- and 27% of assembly, packaging, and testing.

The capital investment required to replace all that is in the trillions.
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Aug 18
With @hassankhan and @EricBreckenfeld we explore an important question: What happens to the world if Taiwan's chips are taken away?…
Taiwan (and TSMC in particular) is very important! They
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Without them, the tech industry would cease to function.
Take an example: a 20% shortage of chips in 2021 led to 0.5 to 1% drop in GDP and companies had only 5 days of semiconductor stocks in inventory. If that was 0 days, the impacts would be much worse! Entire industries would close and the ripple effect would hurt the entire economy
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