Export Control Uncertainty Is at ‘All Time High,’ Chip Industry Official Says

The semiconductor industry is pushing the Biden administration for more transparency surrounding its future plans for export controls on chips and chip tools, saying the uncertainty is causing more foreign customers to avoid using advanced U.S.-origin technology. The industry also warned that China has seen a sharp uptick in domestic orders for chips and chipmaking equipment following the most recent U.S. controls, potentially jeopardizing sales to the American semiconductor industry’s largest market.

“The level of uncertainty about what new controls might or might not be imposed in the future is at an all-time high,” Mary Thornton, vice president for global policy at the Semiconductor Industry Association, said during a Bureau of Industry and Security technical advisory committee meeting this week. She also said the “level of complexity” of the latest Oct. 17 rules (see 2310170055) and Oct. 7, 2022, rules (see 2210070049) is just as high, adding that industry needs more of an advance warning and closer collaboration with BIS before the next update, which is expected next year.

The semiconductor industry needs “significantly more detail as to the medium- and long-term control plan for business planning purposes,” Thornton said. Although BIS may share some of that information with its TACs -- which are composed of industry officials that advise BIS on export control issues -- Thornton said the TACs include many “compliance-oriented folks” who “may not always have visibility into the longer-term business plans or industry trends.”

BIS should pursue other avenues in addition to the TACs to gather input on upcoming chip rules, Thornton said, including in the relaunched President’s Export Council Subcommittee on Export Administration (see 2311290061). She said the Biden administration should “make a concerted effort” to include chip industry representatives on that subcommittee.

Until then, the U.S. should make any future export control plans “transparent and predictable,” Thornton said. Timelines for businesses within the chip industry are “long,” Thornton said, and “global supply chains are very complex. To make stable business development and production plans, companies need to factor in what the regulatory and other environments are going to be several years out.”

At the very least, Commerce should issue any new controls as a proposed rule, she said, which generally seek feedback from industry, academia and others before new restrictions are finalized, giving the government time to address any potential unintended consequences. Thornton said both the Oct. 17 rules this year and the Oct. 7, 2022, chip control rule were “published under irregular and compressed time frames.”

It doesn’t help that each of the rules is difficult to decipher, Thornton said. Trade groups and chip companies have called the restrictions among the most complex export regulatory provisions ever published (see 2302020034 and 2211010042), and Thornton said the industry is still “struggling to understand” them.

“Our view is that rules should be clear, straightforward to comply with, and shouldn't require individual companies to have to interpret the spirit of the law,” she said.

Although SIA “appreciated” the work of BIS to coordinate some of the controls with Japan and the Netherlands, Thornton said there are still “significant asymmetries” between how the three countries administer those restrictions. She specifically pointed to the new U.S. end-use controls that place license requirements on certain U.S. persons activities that qualify as “support” for advanced Chinese fabs.

“The Japanese and Dutch controls include no such restrictions,” Thornton said. “This puts U.S. equipment companies at a significant competitive disadvantage compared to their global counterparts who can continue to sell most semiconductor manufacturing equipment to China.”

She also urged the administration to better “consider the unintended secondary effects of technology controls,” saying the restrictions have “led to a redoubling of China's efforts to build out its domestic semiconductor production capacity.” That’s also true for chip equipment production, Thornton said, adding that orders for domestically produced Chinese chip tools are “accelerating significantly.”

“Nearly half of all machinery equipment tenders by Chinese foundries in the first six months of this year were won by domestic Chinese equipment manufacturers,” she said. “The design-out of U.S.-origin or U.S. company-branded semiconductors is another unintended consequence of export controls, or even the rumor” of future export controls.

Thornton did, however, applaud a decision by BIS to exclude certain deemed export controls -- which place license requirements on certain transfers that take place on U.S. soil -- from the scope of the chip rules. She said the exclusion was “thoughtful.”

If BIS had put in place those deemed export licensing requirements -- even if the agency had in place a license review policy of presumption of approval -- it would have “created significant business and operational delays for SIA member companies,” Thornton said, who would have been forced to apply for a host of new licenses. She asked BIS to consider similar exclusions for certain microprocessor technology controlled under Export Control Classification Number 3E002 and certain computer technology controlled under ECCN 4E001.