Export Controls on Semiconductor Manufacturing Equipment Recommended by White House

Semiconductors are a major plank of the broad supply chain vulnerability report released by the White House, and the report tries to grapple with the fact that major U.S. manufacturers are reliant on exports to China and that the U.S. and its allies want to maintain a technology edge over Chinese chip manufacturers.

Semiconductors are the fourth-leading export from the U.S., after aircraft and two forms of oil, and total sales in 2020 were $47 billion, according to the report, which was released June 8. "Due to China’s dominance in the electronics assembly space, U.S. chipmakers are also heavily dependent on sales to China. China is the largest market for semiconductors, most of which are then re-exported when contained in end products, including consumer electronics and appliances. According to The Economist in 2018, for example, mobile phone chip provider Qualcomm generated two-thirds of its revenue from China, and memory maker Micron generated 57 percent of its revenue from the country. Intel reported in 2020 that China accounted for 26 percent of its revenue. Heavy reliance on sales to China provides the Chinese Government with economic leverage and the potential to retaliate against the United States," the report said.

The report says that export controls on semiconductor manufacturing equipment and designs could protect the U.S. technological advantage in semiconductor manufacturing and advanced packaging, but that export controls must be coordinated with allies for effective multilateral controls.

"The fact that most advanced technology links in the semiconductor supply chain are concentrated among countries that are U.S. allies and partners creates an opportunity to forge a cooperative, multilateral approach to semiconductor-related issues. These countries share many of the same concerns, including supply chain vulnerabilities, the importance of technological leadership, and countering China’s aspirations," the report said. "Ongoing engagement with these like-minded countries will foster harmonization of export control policies, international research partnerships, and amelioration of supply chain vulnerabilities by establishing a diverse supplier base. International engagement on these issues is necessary to promote a 'level playing field' for U.S. industry."