BIS 'Could Not Wait' for Allies to Impose Similar Chip Controls, Official Says

The Bureau of Industry and Security is working to convince more countries to place export controls on advanced semiconductors and chipmaking equipment destined to China, but the agency couldn’t afford to delay its most recent chip controls as other nations mulled them over, said Thea Kendler, BIS assistant secretary for export administration. While the agency prefers to implement its chip controls and other restrictions alongside allies, “we will not hesitate to act unilaterally to protect U.S. national security,” Kendler said.

“Because we have a deep national security concern stemming from the misuse of an emerging technology, we could not wait” to release the updated chip controls published last month (see 2310170055), Kendler said in remarks prepared for a speech at Stanford University last week. She acknowledged the controls “are not multilateral” and the U.S. doesn’t “yet have consensus for our advanced chip and semiconductor manufacturing equipment controls through a formal multilateral regime.”

But she said some other countries -- likely referencing the Netherlands (see 2306300028) and Japan (see 2303310031) -- have adopted “similar controls,” and the agency is working to push others to do the same. “We are working on multilateral or plurilateral controls to address advanced semiconductors,” Kendler said. And even if other countries don’t impose similar controls, the U.S. still can exercise jurisdiction over certain foreign-made chips produced with certain U.S. software or technology by using its Foreign Direct Product Rule, Kendler said.

“Even when fabricated outside the United States, such as in Taiwan, the advanced chips controlled under our regulations are the direct products of U.S. tooling and software,” she said.

The chip industry has urged BIS to impose the controls multilaterally, saying unilateral restrictions could disadvantage U.S. companies by placing limits on their exports that foreign competitors don’t also face (see 2302020034). Kendler said BIS is “working hard to ensure that our unilateral controls do not have unintended spill-over effects,” adding that the U.S. “cannot hinder U.S. exports only to create a market opportunity that firms based in other countries quickly fill.”

But she said the U.S. “cannot be naive. Some technologies that can be used for good can also be weaponized in the wrong hands. This means that tools like export controls are more important than ever in balancing the risk and benefits of dual-use technology.”

Kendler also said working through some multilateral regimes -- such as the Wassenaar Arrangement, which requires consensus to adopt new controls but which includes Russia as a member -- has become increasingly challenging. Those regimes are still important because many U.S. allies don’t have domestic export control authorities to impose restrictions unless they’ve been adopted by a certain multilateral regime, Kendler said. But “on the downside,” she said, “the regimes can be slow and are certainly complicated by the need for unanimity.”

“Let me be clear -- the United States remains deeply engaged in these regimes, and we continue working through them to counter the national security concerns that they were designed to address,” Kendler said. “Yet we face a problem,” noting that along with Russia being a member of Wassenaar and the Missile Technology Control Regime, both China and Russia are also members of the Nuclear Suppliers Group.

“Russia has hampered the updating of controls on emerging technologies through the Wassenaar Arrangement,” she said. Although Wassenaar has seen a sharp drop in consensus since Russia’s invasion of Ukraine last year, the head of the group’s secretariat said in September that he’s hopeful the regime will be able to agree to more export control proposals this year (see 2309270015).

“The best way to truly keep potentially dangerous technologies and know-how out of the hands of bad actors is to work together,” Kendler said. “Coordinated controls reduce instances of evasion or backfill by other suppliers from other countries, ensuring that our controls remain effective over the long term.”

She pointed to the agency’s October decision to extend chip authorizations for South Korean semiconductor companies Samsung and SK Hynix to allow them to continue supplying certain controlled chip equipment to their Chinese factories (see 2310130016). The authorization applies to those companies’ “specific facilities that have undergone a national security review,” she said, adding they will be allowed to receive items that would otherwise have been subject to unilateral license requirements.

She called that decision “critical for the ongoing prosperity of our global semiconductor supply chain,” and it “ensures that this supply chain remains as secure and transparent as possible.”

Kendler also stressed the importance of the U.S. relationship with South Korea, saying she has “great hopes” for the dual-use export controls working group announced by the two sides last year (see 2211090020). She said BIS is using the group to improve “collaboration” with South Korea in export controls, including around advanced manufacturing, and share best practices ‘to increase stakeholder engagement and support across government, industry, and civil society.”

U.S. work with South Korea, along with Japan, also has helped it “navigate our relationships in Southeast Asia,” Kendler said. She said the region is “increasingly positioned as a reliable and responsible contributor” to the world’s critical technologies. “We hear from multinational corporations just how important Southeast Asia is to their diversification and de-risking plans.”

She said she specifically sees Vietnam, Malaysia and Thailand emerging as “key players” in the manufacturing portions of global technology supply chains. Malaysia in particular has “played a crucial role in the diversification of the global semiconductor supply chain,” noting that Infineon, Intel, Texas Instruments and others plan to invest and expand in the country.

“Our partnerships in the East Asia region are critical to the strategy’s success,” she said. “Together, we face a need for new global approaches to strategic trade.”