Joe Biden’s Parting Gift To China, A Final Crackdown On Semiconductor Toolmakers. The Ever Increasing Chip War.

As the clock ticks down on Joe Biden’s presidency, his administration is preparing a significant final act in the ongoing U.S.-China semiconductor conflict. Just days before a new administration takes office, the U.S. will impose its third major crackdown in three years on China’s semiconductor industry.

Scheduled for Monday, this sweeping move targets 140 Chinese companies, including prominent chip equipment makers like Naura Technology Group, Piotech, and SiCarrier Technology, tightening the noose on China’s access to advanced semiconductor technology.

The Strategic Strike

The new restrictions extend beyond merely curbing technological exports. They are a calculated effort to stifle Beijing’s ambitions to dominate the semiconductor sector—a critical pillar for advancements in artificial intelligence (AI) and military applications which Washington views as a potential threat to national security.

The timing is notable, as it precedes the anticipated swearing-in of former President Donald Trump, who is expected to maintain many of Biden’s stringent China policies.

The crackdown aims to block shipments of advanced memory chips and additional chipmaking tools to China, directly challenging Beijing’s technological progress.

The sanctions package introduces:

New Export Curbs on High Bandwidth Memory (HBM) Chips: Critical for AI training and high-performance computing applications.

Restrictions on 24 Additional Chipmaking Tools and Three Software Tools: Affecting equipment manufactured in countries such as Singapore and Malaysia.

Expansion of the U.S. Entity List: Nearly two dozen semiconductor firms, two investment firms, and over 100 chipmaking tool companies will face stringent licensing requirements.

This will likely impact major U.S. companies like Lam Research, KLA, and Applied Materials, as well as non-U.S. firms such as Dutch semiconductor equipment maker ASM International.

Chinese companies tied to Huawei Technologies—such as Swaysure Technology Co, Qingdao SiEn, and Shenzhen Pensun Technology Co—are under scrutiny due to their roles in China’s advanced chip production. These firms will be added to the Entity List, effectively barring U.S. suppliers from shipping to them without special licenses.

China has accelerated its push for self-sufficiency in semiconductor production amid increasing export restrictions from the U.S. and other nations. However, it remains years behind global leaders like Nvidia in AI chip development and Dutch company ASML in chipmaking technology.

The U.S. is also preparing to impose additional restrictions on Semiconductor Manufacturing International Corp (SMIC), China’s largest contract chip manufacturer, which has been on the Entity List since 2020 but previously benefited from substantial licensing exceptions.

In a first, the U.S. will also add two investment firms—Chinese private equity firm Wise Road Capital and tech company Wingtech Technology Co—to the Entity List, signaling a broader crackdown on financial involvement in the chip sector. Historically, most license applications to ship to Entity List firms are denied, further tightening China’s access to critical semiconductor technologies.

Dutch and Japanese Exemptions in New U.S. Semiconductor Export Rules

The latest U.S. export control package introduces stricter measures under the foreign direct product rule, potentially impacting U.S. allies by limiting their ability to ship certain chipmaking equipment to China. This expanded rule targets equipment produced by U.S., Japanese, and Dutch manufacturers in countries such as Malaysia, Singapore, Israel, Taiwan, and South Korea. However, the Netherlands and Japan will be exempt from these restrictions.

The revised rule will apply to 16 companies on the U.S. Entity List, identified as critical to China’s advanced chipmaking ambitions. Additionally, the threshold for U.S. content in foreign-manufactured items subject to U.S. control will be reduced to zero, allowing the U.S. to regulate any item containing even minimal U.S. chip components if shipped to China.

These changes come after extensive negotiations with Japan and the Netherlands, both of which, along with the U.S., dominate the production of advanced semiconductor equipment. The U.S. plans to exempt countries that implement similar export controls, strengthening a coordinated effort to curb China’s semiconductor advancements.

Another key provision targets high-bandwidth memory (HBM) chips, specifically “HBM 2” and higher, which are vital for AI applications. This rule primarily affects South Korean manufacturers Samsung and SK Hynix, along with U.S.-based Micron. Industry insiders believe Samsung Electronics will be most significantly impacted.

The Chip War and What’s at Stake. A Battle for Technological Supremacy

The global semiconductor industry has become the focal point of a fierce geopolitical contest between the U.S. and China, with stakes only getting higher. Dubbed The Chip War, this battle isn’t just about technological dominance—it’s about securing a future where economic power, national security, and global influence are defined by who controls the world’s most critical technology.

A $600 Billion Industry at the Heart of Global Tensions

The semiconductor industry, valued at over $600 billion in 2023, is the backbone of modern technology. From smartphones and electric vehicles to military defense systems and artificial intelligence (AI), semiconductors power it all. Yet, the industry is highly concentrated, with just a few players dominating critical areas:

• Taiwan’s TSMC produces over 60% of the world’s semiconductors and 90% of the most advanced chips.

• South Korea’s Samsung and SK Hynix are global leaders in memory chips, controlling nearly 70% of the market.

• The U.S. leads in chip design, with companies like Nvidia, Intel, and AMD commanding a combined market share of over 85% in AI chips.

• The Netherlands’ ASML is the sole supplier of extreme ultraviolet (EUV) lithography machines, essential for producing cutting-edge chips.

China’s Drive for Self-Sufficiency

Despite these measures, China is investing heavily in its semiconductor sector, pouring an estimated $150 billion into research and development over the past decade. However, it remains significantly behind in key areas:

AI Chips: Companies like Nvidia and AMD are years ahead in AI processing capabilities.

Chip Manufacturing Equipment: China still relies heavily on imports, particularly from ASML and U.S.-based Applied Materials, Lam Research, and KLA.

Winners and Losers

The ripple effects of this chip war extend far beyond China and the U.S. – with restrictions on Chinese imports, U.S. companies like Micron, Lam Research, and KLA risk losing billions in revenue.

Likewise while South Korea’s Samsung and Taiwan’s TSMC are likely to benefit from increased demand for non-Chinese chips, they also face risks due to their reliance on the Chinese market, which accounts for up to 40% of their exports.

Dutch equipment giant ASML stands to maintain its edge with exemptions from U.S. controls, securing its dominant position in the EUV market.

At the core of the chip war lies a broader question – who will shape the future of AI, quantum computing, and military technology?
Winning this battle means not only controlling the semiconductor supply chain but also defining the rules of technological innovation for decades to come.

The U.S. and its allies aim to maintain their lead, but China’s relentless pursuit of self-reliance signals that this war is far from over. As billions of dollars continue to flow into R&D and strategic partnerships shift, the outcome will redefine global power dynamics, impacting industries, economies, and societies worldwide.

The Last Bit

This latest move by Biden indicates at a broader, bipartisan stance in Washington: curbing China’s technological rise is now a matter of national strategy. As former President Donald Trump prepares to reassume leadership, it is widely expected that these tough-on-China policies will persist.