The detailed rules of the US chip restriction "guardrail" to China were announced

According to Bloomberg, the US Department of Commerce issued the so-called "guardrail" measures in the "Chip and Science Act" on the 21st local time, imposing strict restrictions on the business of semiconductor manufacturers who receive US funds in China. Some Korean media pointed out in a report on the 22nd that this is to "punish" international companies investing in China.

The Chips and Science Act, introduced last August, envisages $50 billion in direct grants, federal loans and loan guarantees to build semiconductor research and manufacturing capabilities in the United States. At the same time, the bill also prohibits subsidized companies from using these funds in other countries on the grounds of "national security", and strictly restricts companies' investment in semiconductor manufacturing in "countries of concern" such as China in the next 10 years, and prohibits some joint research and technology licensing.

A statement from the U.S. Department of Commerce on the 21st said that the "Notice of Proposed Rulemaking" issued by the Department on the same day provided more details related to the so-called "guardrail" measures mentioned above. The Chips and Science Act would prohibit U.S.-funded semiconductor makers from expanding production of advanced technologies by more than 5 percent in China, from expanding production of traditional technologies by more than 10 percent, and caps spending by semiconductor manufacturers at $100,000 on investments in China's advanced capacity.

Screenshot of Bloomberg report

The statement asserted that if a company receiving the grant engages in a transaction that violates these restrictions, the U.S. Department of Commerce has the right to recover the entire incentive. There is a 60-day public comment period for these rules.

Bloomberg said that the new restrictions, if passed, will put more pressure on leading companies TSMC, Samsung Electronics and Intel, all of which have related operations in China. The "Chosun Ilbo" said on the 22nd that this is to "punish" international companies investing in China.

However, an official familiar with the rule told Bloomberg that while the proposed rule limits manufacturing expansion, companies receiving U.S. funding could still upgrade existing facilities to produce more advanced semiconductors if they obtain the necessary export control licenses from the Commerce Department.

South Korea is cautiously optimistic about the relevant rules of the Chip and Science Act. According to Yonhap News Agency reported on the 22nd, the South Korean side believes that the detailed rules will not affect the production and operation of Korean enterprises in China, and the Ministry of Industry, Trade and Energy (hereinafter referred to as the "Ministry of Industry") pointed out that the increase in storage capacity per chip area brought about by technological upgrading is not regarded as capacity growth, and enterprises can further increase production capacity. The East Asia Daily said that semiconductor companies such as Samsung Electronics and SK Hynix said that the worst case had been avoided.

However, Yonhap News Agency also pointed out on the 22nd that although it is temporarily "avoided", the United States' containment of China is still in full swing, and the relevant licensing content and standards may also change over time, "In the Chinese market, which has brought great expectations to Korean companies so far, the 'window of opportunity' will become smaller and smaller." During his visit to the United States on December 8, Andeok-moto, director of the Ministry of Industry's Trade and Negotiation Department, publicly told reporters that the government has concerns about the details of the "Chip and Science Act", such as requiring too much information and excessive restrictions on business in China.

It is reported that the US officials responsible for the landing of the "Chip and Science Act" trip plan to visit South Korea, Japan and Taiwan from Tuesday (21st). South Korea's Ministry of Industry said that the government will continue to communicate with the industry, carefully analyze the content of the detailed rules, and continue consultations with the United States during the 60-day consultation period based on the results of the analysis. Samsung and Hynix also said that they will carefully study the detailed rules announced by the United States and formulate a response plan for the future. Intel did not immediately respond to a request for comment.

"Diplomat" and "Forbes" magazine have written articles a few days ago pointing out that the "war" of the United States against China's semiconductor industry has escalated again. In Japan, Nikon and Tokyo Electron are under pressure as a result; In the Netherlands, most of the pressure falls on the shoulders of ASML, the world's only producer of EUV (extreme ultraviolet) and DUV (deep ultraviolet) lithography machines.

Japanese media previously reported that relevant export controls may hit Japanese companies. Related companies have felt the chill, and some Japanese manufacturers have said: "Even if their own equipment is not subject to control, if China's equipment investment slows down, it will be indirectly hit." In November last year, Tokyo Electron cut its consolidated sales forecast for fiscal 2022 by 250 billion yen (about 13.1 billion yuan) after the United States separately proposed to strengthen export controls on China, and company executives said there was a "risk of delaying the purchase of equipment" by Chinese customers, and that tighter controls by the United States could lead to an escalation of the impact.

In 2022, 14% of ASML's sales will come from the Chinese market. In an interview with Bloomberg in January, ASML CEO Winningk also pointed out that US export controls may instead enable China to successfully develop a lithography machine technology comparable to ASML. "If they can't get these machines, they'll develop them themselves." It will take time, but eventually they will reach the goal. "The more you put pressure on them [Chinese], the more likely they are to redouble their efforts." ”

In response to the "guardrail" provisions of the Chip and Science Act issued by the US Department of Commerce, Chinese Foreign Ministry spokesman Wang Wenbin also reiterated China's principled position at a press conference on March 22. He pointed out that the so-called "guardrail" of the US side is an outright act of scientific and technological blockade and protectionism. In order to maintain its own hegemony, the United States has constantly generalized the concept of national security, abused export control measures, and even sacrificed the interests of its allies to coerce some countries to contain and contain China, artificially promoting industrial decoupling and breaking the chain, seriously violating the laws of market economy and the principle of fair competition, and seriously hindering world economic recovery and development.

Wang Wenbin said: We are resolutely opposed to this and have made solemn representations to the US side on many occasions. China will continue to firmly safeguard the legitimate and legitimate rights and interests of Chinese enterprises. Containment and suppression will not stop the pace of China's development, but will only enhance China's determination and ability to achieve high-level scientific and technological self-reliance and self-improvement. In order to safeguard one's own hegemonic interests, the kidnapping of normal international economic, trade, and scientific and technological cooperation will eventually become a cocoon and self-restraint. We hope that all parties will proceed from their own long-term interests and the principle of fair and just market, abide by international economic and trade rules, and work with China to safeguard the stability of the global industrial chain and supply chain, and safeguard the common interests of all parties.

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