Think Tank Calls for Multilateral Export Controls Over Low-Level Chip Tools to China

The U.S. should convince Japan, the Netherlands and other allies to restrict exports of lower-level chipmaking equipment to China to prevent Beijing from becoming the global leader in the "foundational" semiconductors those tools can produce, the Silverado Policy Accelerator think tank said in a new report last week. The report warned that current restrictions on advanced equipment risks pushing China to instead dominate the foundational chip sector, which will increase the likelihood that those semiconductors will be incorporated in U.S. defense technologies and could help Chinese companies “climb the value chain in leading-edge nodes, whether through legitimate or illegitimate means.”

The think tank called for an “agreement” between the U.S. and its partners to place export controls on lower-level chip manufacturing equipment. The U.S. can incentivize other countries to adopt these controls by offering to partner with their chip companies for projects in the U.S. and elsewhere, the report said, including through incentives offered by the U.S. Chips Act. The report stressed these restrictions can’t be unilateral and must be “coupled with intensified efforts by the governments to help create new markets for” chip equipment exporters.

The report offers a range of other recommendations on how the U.S. can make sure China doesn't dominate the supply chain for foundational semiconductors, including tailoring its upcoming outbound investment prohibitions (see 2310050035) to also target China’s foundational chip sector. The Treasury Department should make sure the new regime “deters further growth of China’s foundational semiconductor capacity and production” and “at a minimum” should include a notification requirement for companies to disclose any investments in Chinese chipmaking companies that manufacture foundational semiconductors.