Companies Disclose Compliance Hurdles, Fallout From New US Chip Controls

As U.S. chip and technology companies continue to grapple with the U.S’s latest export restrictions on China (see 2211010042), a number of firms fear the controls will hurt their sales and exacerbate uncertainty in the semiconductor sector and the industry’s supply chains. In filings with the Securities & Exchange Commission this month, at least one firm projected revenue losses while others said they are still assessing the impact of the complex controls and whether they can secure export licenses.

ACM Research, which produces equipment for applications in integrated circuits and wafer level packaging, said its Shanghai subsidiary will likely face restrictions under the new rules, which were announced by the Bureau of Industry and Security last month (see 2210070049). ACM’s subsidiary sells to customers with China-based facilities that are subject to BIS’s new license requirements, and “several” of ACM’s products may be items that meet the parameters of the new Export Control Classification Numbers introduced by the restrictions, the company said in a Nov. 4 SEC filing.

ACM said its Shanghai subsidiary “may not be able to import parts from the U.S. to support tool shipments to such facilities” or to “import parts to be embedded into tools defined by such ECCN’s” if BIS requires a license under a review policy of presumption of denial. “ACM Shanghai is working with its various suppliers to continue to source tool components that we and our suppliers assess are not impacted by the new controls, to enable shipments to its customer base,” the company said. ACM added that it has “adjusted the activities of some of its U.S. persons and its supply chain” to make sure it’s complying with the new rules.

Arista Networks, a networking hardware company, said the new controls could hurt its exports to China and restrict the company’s ability to use certain integrated circuits in its products, according to its SEC filing. The controls could also “disrupt the ability of China to produce semiconductors and other electronics and impact our ability to source components from China,” the company said, adding that the cost of components or inputs used in its products could rise. It also said it's preparing for retaliation from China, which “could impact our business.”

“There is currently significant uncertainty about the future relationship between the United States, and various other countries, most significantly China, with respect to trade policies, treaties, tariffs and taxes,” Arista said. “If we are unable to obtain components or component prices increase significantly, it may negatively impact our ability to sell products to customers, which could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.”

The “increasingly strict export control restrictions,” along with potential retaliation from China, could “disrupt global semiconductor supply chains and make it more difficult for us to procure components for our products,” said Mirion Technologies, a supplier of nuclear measurement and detection systems. The company said the controls may affect “products we sell.”

Some of Mirion's customers are designated on the Entity List, "which can make it more difficult or not possible to supply our products to those entities,” the company said in a filing. “If more of our customers are added to the BIS Entity List, it could make it more difficult to supply our products to those customers.”

Entegris, a supplier of advanced materials for the semiconductor industry, said it expects its sales to drop by about $40 million to $50 million for the fourth quarter of 2022 as a result of the new restrictions, according to its SEC filing. The company said the BIS controls will restrict its sales of “semiconductor technology to certain companies in China.”

The new BIS controls are “lengthy and complex,” said Teradyne, an American automatic test equipment designer and manufacturer that supplies to Samsung, Qalcomm, Intel and other major technology companies. Teradyne said it's continuing to “assess the impact of these regulations on its business,” according to its SEC filing, but has determined some of its sales will be impacted.

The company specifically said it will face restrictions on its sales of “semiconductor testers” to Chinese facilities. Although several chip companies “obtained one-year licenses allowing suppliers such as Teradyne to continue to provide testers to the facilities operated by these companies,” other firms haven’t received the licenses, the company said. “We expect that other companies manufacturing advanced semiconductors in China will not receive licenses, thereby restricting Teradyne’s ability to provide testers to the facilities operated by these companies that do not receive a license,” it said in its filing.

Teradyne also said it's “assessing” whether it should file license applications with BIS to “sell to and support certain customers in China for certain end uses that, if granted, may reduce the impact of these restrictions on the Company’s business.” The company said it isn’t sure what kind of “impact these end user and end use restrictions will have on its business in China or on future revenues.”

The new BIS controls also place restrictions on certain U.S.-origin parts and technology used in the development and production of certain semiconductor manufacturing equipment in China, which could hurt Teradyne’s “manufacturing and development operations in China,” the company said. It also said it received a “temporary authorization” from the Commerce Department, which will allow it to “continue its manufacturing and development operations in China until the Department of Commerce issues a license to replace this temporary authorization.”

Teradyne said it plans to ask BIS by Nov. 17 for a license to replace the temporary authorization. “The Company cannot assess the likelihood or timing of receiving this license,” Teradyne said. “In addition to requesting a license, the Company is implementing procedures for minimizing the impact of these new regulations, but there is no assurance that these procedures will succeed.”