REUTERS
"As Japan aligns with U.S. chip curbs on China, some in Tokyo feel uneasy"
By Tim Kelly, Karen Freifeld and Kentaro Sugiyama
July 24, 2023
TOKYO/NEW YORK, July 24 (Reuters) - Japan's imposition of export controls on chip making tools to align with a U.S. policy restricting China's ability to produce advanced semiconductors is worrying some officials in Tokyo who believe a combative U.S. approach may hamper coordination and needlessly provoke Beijing.
From this week, Japan is restricting 23 types of equipment, ranging from machines that deposit films on silicon wafers to devices that etch out the microscopic circuits of chips that could have military uses.
But, while the U.S. referenced China 20 times in its October announcement targeting Chinese companies, Japan has chosen broad equipment controls not specifically aimed at its bigger neighbour.
"We feel an odd discomfort with how the U.S. is doing this."
"There's no need to identify the country, all you need to do is control the item," a Japanese industry ministry official told Reuters.
Japan can't sanction countries unless they are involved in a conflict, the source added.
Japan's trade and industry minister told reporters when announcing Japan's measure in March that China was only one of 160 countries and regions that would be subject to controls and that Japan's rules were not meant to follow the U.S.
Even so, China has warned Japan to backdown.
Tokyo and Washington share concerns about China's push for advanced technologies and in May agreed with other Group of Seven industrial democracies on "de-risking" from potential Chinese economic coercion.
However, differences in chip making equipment controls could test that unity, should either gain a competitive advantage over the other by allowing exports the other blocked.
"Each country is responsible for its own licensing policies, and on top of that it's up to each country to enforce the licensing decisions that it undertakes," said Emily Benson, the director of the trade and technology project at the bipartisan nonprofit Center for Strategic and International Studies in Washington.
Japan is not applying a U.S. standard of presumption of denial and will allow exports whenever possible, a second Japanese government official said.
The Japanese government sources asked to remain anonymous because of the sensitivity of the issue.
There may also be underlying tensions because unlike Japan and the Netherlands, which will implement controls starting September, the U.S. is not limiting restrictions to specific tools.
"The U.S. rules still restrict other items and services the others do not," said Washington trade lawyer Kevin Wolf.
Reuters contacted six chip tool makers in Japan.
Two of them, deposition machinery maker Kokusai Electric and Japan's leading chip tool maker Tokyo Electron, said they expect Japan's controls to have a limited business impact.
Chip tester company Advantest Corp said none of its products are affected.
Lithography machine makers Nikon Corp and Canon Inc, and wafer cleaner manufacturer Screen Holdings did not respond.
COORDINATION
Dovetailing Japan's controls with those of the U.S. and the Netherlands will require close coordination.
"The issue in all these things is, what is it you can let go safely and what do you need to block."
"Everyone draws the line a little bit differently," said Jim Lewis, a former U.S. State Department and Commerce Department official, and a researcher at the Center for Strategic and International Studies (CSIS).
He has met with Japanese trade officials and believes Tokyo is committed to curbing certain exports.
Tokyo, Amsterdam and Washington have all indicated they would like chip tools added to a list of weapons, dual-use goods and technologies controlled by the 42 nations that are party to the Wassenaar Arrangement established after the Cold War.
They are unlikely, however, to win the unanimous backing they need from its members.
"The Wassenaar arrangement is next to hopeless because Russia's a member," said Lewis.
"You're never going to start by getting universal consensus."
"So, pick the guys who care and get them to work together."
The alternative is to form a closer group with the U.S. and the Netherlands to oversee chip manufacturing tools that could eventually include other countries, the first Japanese industry ministry official said.
The U.S. Commerce Department and Dutch government declined to comment.
The White House did not respond to a request for comment.
BROADER RESTRICTIONS
In the meantime, U.S. President Joe Biden's administration is expected to update its October rules, in part to align with the broader Japanese tool list.
It could also go further than the Netherlands in limiting what Dutch lithography manufacturer ASML can supply to certain Chinese plants, Reuters exclusively reported last month.
The U.S. can regulate ASML directly as its equipment includes U.S. parts.
At the time, sources expected the updates in July, but that now appears unlikely.
"Part of the reason it's taking so long is that the U.S. is still talking to Japan."
"They need to make sure that if they block anything, that they similarly block it in Japan," said a source familiar with the discussion.
Tokyo remains worried that targeting China will provoke damaging retaliation, such as a ban on Japanese electric cars, a third Japanese industry official said.
"What advantage is there to making someone lose face, unless that is your objective."
Reporting by Tim Kelly Karen Freifeld, Kentaro Sugiyama; additional reporting by Toby Sterling and Yoshifumi Takemoto; Editing by Lincoln Feast
https://www.reuters.com/technology/spac ... 023-07-24/
CHINA
Re: CHINA
REUTERS
"US commerce chief says China export controls will hit companies' revenue"
By David Shepardson
July 26, 2023
WASHINGTON, July 26 (Reuters) - Commerce Secretary Gina Raimondo said on Wednesday the Biden administration is seeking to carefully target U.S. controls on exports to China, but rules will cost firms some revenue.
Restrictions should not be so broad "that you deny American companies revenue and China can get the product elsewhere, or China can get the product from other countries," Raimondo said at a forum.
Rules "will deny some revenue to American companies, but we think it's worth it."
Last week, U.S. chip company executives met with top Biden administration officials, including Raimondo, to discuss China policy, as the most powerful semiconductor lobby group urged a halt to more curbs under consideration.
Raimondo said the administration is meeting with companies "to get to the right place so we don't damage American business but quite frankly protect American national security."
Last year, China accounted for $180 billion in semiconductor purchases, close to a third of the worldwide total of $574.1 billion and the largest single market, according to the Semiconductor Industry Association.
Nvidia, Qualcomm and Intel have crucial sales riding on China.
Qualcomm is the only company with a license from U.S. regulators to sell mobile phone chips to Huawei.
The Biden administration is considering updating a sweeping set of rules imposed in October to hobble China's chip industry and a new executive order restricting some outbound investment.
"This isn't about holding China back or denying them commodity technology," Raimondo said.
China wants access to the United States most sophisticated technology "to advance their military and we're not going to allow that," she said.
The "timetable is as fast as we can and make sure it is correct," she added.
Raimondo, Secretary of State Antony Blinken, National Economic Council director Lael Brainard and National Security Council director Jake Sullivan were among government officials who met with Intel, Qualcomm and Nvidia last week, according to a source familiar with the meetings.
Reporting by David Shepardson; Editing by Leslie Adler
https://www.reuters.com/technology/us-c ... 023-07-27/
"US commerce chief says China export controls will hit companies' revenue"
By David Shepardson
July 26, 2023
WASHINGTON, July 26 (Reuters) - Commerce Secretary Gina Raimondo said on Wednesday the Biden administration is seeking to carefully target U.S. controls on exports to China, but rules will cost firms some revenue.
Restrictions should not be so broad "that you deny American companies revenue and China can get the product elsewhere, or China can get the product from other countries," Raimondo said at a forum.
Rules "will deny some revenue to American companies, but we think it's worth it."
Last week, U.S. chip company executives met with top Biden administration officials, including Raimondo, to discuss China policy, as the most powerful semiconductor lobby group urged a halt to more curbs under consideration.
Raimondo said the administration is meeting with companies "to get to the right place so we don't damage American business but quite frankly protect American national security."
Last year, China accounted for $180 billion in semiconductor purchases, close to a third of the worldwide total of $574.1 billion and the largest single market, according to the Semiconductor Industry Association.
Nvidia, Qualcomm and Intel have crucial sales riding on China.
Qualcomm is the only company with a license from U.S. regulators to sell mobile phone chips to Huawei.
The Biden administration is considering updating a sweeping set of rules imposed in October to hobble China's chip industry and a new executive order restricting some outbound investment.
"This isn't about holding China back or denying them commodity technology," Raimondo said.
China wants access to the United States most sophisticated technology "to advance their military and we're not going to allow that," she said.
The "timetable is as fast as we can and make sure it is correct," she added.
Raimondo, Secretary of State Antony Blinken, National Economic Council director Lael Brainard and National Security Council director Jake Sullivan were among government officials who met with Intel, Qualcomm and Nvidia last week, according to a source familiar with the meetings.
Reporting by David Shepardson; Editing by Leslie Adler
https://www.reuters.com/technology/us-c ... 023-07-27/
Re: CHINA
REUTERS
"China curbs exports of drone equipment amid U.S. tech tension"
Reuters
July 31, 2023
BEIJING, July 31 (Reuters) - China on Monday announced export controls on some drones and drone-related equipment, saying it wanted to safeguard "national security and interests" amid escalating tension with the United States over access to technology.
The restrictions on equipment including some drone engines, lasers, communication equipment and anti-drone systems would take effect on Sept. 1, the commerce ministry said.
The controls would also affect some consumer drones, and no civilian drones could be exported for military purposes, a ministry spokesperson said in a statement.
"China's modest expansion of the scope of its drone control this time is an important measure to demonstrate our stance as a responsible major country, to implement global security initiatives, and maintain world peace," the unidentified spokesperson said.
Authorities had notified relevant countries and regions, the spokesperson said.
China has a big drone manufacturing industry and exports to several markets including the U.S.
U.S. lawmakers have said that more than 50% of drones sold in the U.S. are made by Chinese-based company DJI, and they are the most popular drone used by public safety agencies.
DJI said on Monday it always strictly complied with and enforced laws and regulations of the countries or regions in which it operates, including China's export control regulatory requirements.
"We have never designed and manufactured products and equipment for military use, nor have we ever marketed or sold our products for use in military conflicts or wars in any country," the drone maker added.
A German retailer in March 2022 accused DJI of leaking data on Ukrainian military positions to Russia, which the company rejected as "utterly false".
China's commerce ministry said in April this year that U.S. and Western media were spreading "unfounded accusations" that it was exporting drones to the battlefield in Ukraine, adding the reports were an attempt to "smear" Chinese firms and it would continue to strengthen export controls on drones.
The drone export curbs come after China announced export controls of some metals widely used in chipmaking last month, following moves by the United States to restrict China's access to key technologies, such as chipmaking equipment.
Reporting by Beijing newsroom; Editing by Mark Potter
https://www.reuters.com/world/china-cur ... 023-07-31/
"China curbs exports of drone equipment amid U.S. tech tension"
Reuters
July 31, 2023
BEIJING, July 31 (Reuters) - China on Monday announced export controls on some drones and drone-related equipment, saying it wanted to safeguard "national security and interests" amid escalating tension with the United States over access to technology.
The restrictions on equipment including some drone engines, lasers, communication equipment and anti-drone systems would take effect on Sept. 1, the commerce ministry said.
The controls would also affect some consumer drones, and no civilian drones could be exported for military purposes, a ministry spokesperson said in a statement.
"China's modest expansion of the scope of its drone control this time is an important measure to demonstrate our stance as a responsible major country, to implement global security initiatives, and maintain world peace," the unidentified spokesperson said.
Authorities had notified relevant countries and regions, the spokesperson said.
China has a big drone manufacturing industry and exports to several markets including the U.S.
U.S. lawmakers have said that more than 50% of drones sold in the U.S. are made by Chinese-based company DJI, and they are the most popular drone used by public safety agencies.
DJI said on Monday it always strictly complied with and enforced laws and regulations of the countries or regions in which it operates, including China's export control regulatory requirements.
"We have never designed and manufactured products and equipment for military use, nor have we ever marketed or sold our products for use in military conflicts or wars in any country," the drone maker added.
A German retailer in March 2022 accused DJI of leaking data on Ukrainian military positions to Russia, which the company rejected as "utterly false".
China's commerce ministry said in April this year that U.S. and Western media were spreading "unfounded accusations" that it was exporting drones to the battlefield in Ukraine, adding the reports were an attempt to "smear" Chinese firms and it would continue to strengthen export controls on drones.
The drone export curbs come after China announced export controls of some metals widely used in chipmaking last month, following moves by the United States to restrict China's access to key technologies, such as chipmaking equipment.
Reporting by Beijing newsroom; Editing by Mark Potter
https://www.reuters.com/world/china-cur ... 023-07-31/
Re: CHINA
Radar Online
"New Corruption Scandal: Leaked Text Messages Given to FBI Showing Chinese Wanting Biden Family Name to Help Acquire U.S. Energy Assets"
Story by Connor Surmonte
5 AUGUST 2023
New text messages obtained by the FBI appeared to provide evidence that a Chinese energy conglomerate began pursuing a relationship with the Biden family in late 2015, RadarOnline.com can report.
In a sudden development to come as House Republicans continue to investigate President Joe Biden’s alleged involvement in son Hunter’s overseas business deals, the FBI reportedly obtained messages tying the Bidens to CEFC China Energy.
The texts, which were first obtained by Just the News, were sent by Hunter's business partner, James Gilliar, to future partner Tony Bobulinski on Christmas Eve in 2015.
CEFC China Energy apparently hoped to leverage the Biden name to facilitate a controversial deal to buy up energy assets in the United States at the time.
"There will be a deal between one of the most prominent families from US and [China] constructed by me,” Gilliar stated in one text message.
“I think this will then be a great addition to their portfolios as it will give them a profile base in NYC, then LA, etc.”
“For me it's a no brainer but culturally they are different, but smart so let’s see,” Gilliar continued.
“Any entry ticket is small for them."
"Easier and better demographic than Arabs who are little anti US after trump.”
The text messages revealed that China saw the Biden family name and influence as key to their plans, and the texts further confirmed the bombshell testimony given to Congress earlier this week by another of Hunter's business partners – Devon Archer.
As RadarOnline.com previously reported, Archer claimed that the Bidens were viewed as a "brand" to help foreign clients seeking influence.
Meanwhile, the apparent courtship between CEFC and Hunter Biden appeared to begin in 2015 and progressed slowly over time.
While Hunter initially declined an invitation to dinner with CEFC representatives on December 6, 2015, he ultimately met with CEFC Executive Director Jianjun Zang later that month.
By March 2016, discussions reportedly advanced enough that Hunter's partners drafted a memo for him to sign and send to CEFC.
Over the next two years, the Chinese energy deal would become infamous amid the Biden family scandals.
Hunter allegedly received a 3-carat diamond as a gift from CEFC's leader, Ye Jianming, and Joe Biden reportedly met with CEFC officials.
Emails from Bobulinski also referenced a deal involving "the big guy” – which was believed to be Joe – and a potential share of the deal for him.
Hunter also once allegedly demanded payment from CEFC while suggesting that his father was present during the exchange.
Despite the lucrative payments and consulting fees received by the Biden family, none of the energy deals pursued by CEFC in the United States were ever disclosed.
Congressional investigators are still determining the total financial impact of the CEFC relationship on the Biden family, with estimates ranging as high as $7 million.
Recent court documents filed in Delaware as part of Hunter's ongoing legal troubles exposed additional alleged financial transactions between the embattled first son and CEFC – including a $664,000 payment from one Chinese deal and a $1 million legal retainer fee from another.
House Republican James Comer, who serves as chairman of the House Ways and Means Committee, recently suggested that the new apparent evidence connecting Joe to Hunter’s overseas business dealings proves the president lied to the American public.
“Joe Biden lied to the American people when he said he had no knowledge about his son’s business dealings and was not involved,” Comer charged earlier this week.
“Joe Biden was ‘the brand’ that his son sold around the world to enrich the Biden family.”
https://www.msn.com/en-us/news/politics ... f007e&ei=9
"New Corruption Scandal: Leaked Text Messages Given to FBI Showing Chinese Wanting Biden Family Name to Help Acquire U.S. Energy Assets"
Story by Connor Surmonte
5 AUGUST 2023
New text messages obtained by the FBI appeared to provide evidence that a Chinese energy conglomerate began pursuing a relationship with the Biden family in late 2015, RadarOnline.com can report.
In a sudden development to come as House Republicans continue to investigate President Joe Biden’s alleged involvement in son Hunter’s overseas business deals, the FBI reportedly obtained messages tying the Bidens to CEFC China Energy.
The texts, which were first obtained by Just the News, were sent by Hunter's business partner, James Gilliar, to future partner Tony Bobulinski on Christmas Eve in 2015.
CEFC China Energy apparently hoped to leverage the Biden name to facilitate a controversial deal to buy up energy assets in the United States at the time.
"There will be a deal between one of the most prominent families from US and [China] constructed by me,” Gilliar stated in one text message.
“I think this will then be a great addition to their portfolios as it will give them a profile base in NYC, then LA, etc.”
“For me it's a no brainer but culturally they are different, but smart so let’s see,” Gilliar continued.
“Any entry ticket is small for them."
"Easier and better demographic than Arabs who are little anti US after trump.”
The text messages revealed that China saw the Biden family name and influence as key to their plans, and the texts further confirmed the bombshell testimony given to Congress earlier this week by another of Hunter's business partners – Devon Archer.
As RadarOnline.com previously reported, Archer claimed that the Bidens were viewed as a "brand" to help foreign clients seeking influence.
Meanwhile, the apparent courtship between CEFC and Hunter Biden appeared to begin in 2015 and progressed slowly over time.
While Hunter initially declined an invitation to dinner with CEFC representatives on December 6, 2015, he ultimately met with CEFC Executive Director Jianjun Zang later that month.
By March 2016, discussions reportedly advanced enough that Hunter's partners drafted a memo for him to sign and send to CEFC.
Over the next two years, the Chinese energy deal would become infamous amid the Biden family scandals.
Hunter allegedly received a 3-carat diamond as a gift from CEFC's leader, Ye Jianming, and Joe Biden reportedly met with CEFC officials.
Emails from Bobulinski also referenced a deal involving "the big guy” – which was believed to be Joe – and a potential share of the deal for him.
Hunter also once allegedly demanded payment from CEFC while suggesting that his father was present during the exchange.
Despite the lucrative payments and consulting fees received by the Biden family, none of the energy deals pursued by CEFC in the United States were ever disclosed.
Congressional investigators are still determining the total financial impact of the CEFC relationship on the Biden family, with estimates ranging as high as $7 million.
Recent court documents filed in Delaware as part of Hunter's ongoing legal troubles exposed additional alleged financial transactions between the embattled first son and CEFC – including a $664,000 payment from one Chinese deal and a $1 million legal retainer fee from another.
House Republican James Comer, who serves as chairman of the House Ways and Means Committee, recently suggested that the new apparent evidence connecting Joe to Hunter’s overseas business dealings proves the president lied to the American public.
“Joe Biden lied to the American people when he said he had no knowledge about his son’s business dealings and was not involved,” Comer charged earlier this week.
“Joe Biden was ‘the brand’ that his son sold around the world to enrich the Biden family.”
https://www.msn.com/en-us/news/politics ... f007e&ei=9
Re: CHINA
REUTERS
"Biden signs order to ban certain tech investments in China"
By Karen Freifeld, Andrea Shalal and David Shepardson
August 9, 2023
NEW YORK/WASHINGTON, Aug 9 (Reuters) - President Joe Biden on Wednesday signed an executive order that will narrowly prohibit certain U.S. investments in sensitive technology in China and require government notification of funding in other tech sectors.
The long-awaited order authorizes the U.S. Treasury secretary to prohibit or restrict certain U.S. investments in Chinese entities in three sectors: semiconductors and microelectronics, quantum information technologies, and certain artificial intelligence systems.
Biden said in a letter to Congress he was declaring a national emergency to deal with the threat of advancement by countries like China "in sensitive technologies and products critical to the military, intelligence, surveillance, or cyber-enabled capabilities."
The proposal targets investments in Chinese companies developing software to design chips and tools to manufacture them.
The U.S., Japan and the Netherlands dominate those fields, and the Chinese government has been working to build up homegrown alternatives.
The move could fuel tensions between the world's two largest economies, although U.S. officials insisted the prohibitions were intended to address "the most acute" national security risks and not to separate the two countries' highly interdependent economies.
Senate Democratic Leader Chuck Schumer praised Biden's order, saying "for too long, American money has helped fuel the Chinese military’s rise."
"Today the United States is taking a strategic first step to ensure American investment does not go to fund Chinese military advancement."
He says Congress must enshrine restrictions in law and refine them.
Republicans said the Biden order did not go far enough.
House Foreign Affairs Committee Chairman Michael McCaul praised the move to restrict new outbound investments in China but said "the failure to include existing technology investments as well as sectors like biotechnology and energy is concerning."
The order is aimed at preventing American capital and expertise from helping develop technologies that could support China’s military modernization and undermine U.S. national security.
It is focused on private equity, venture capital, joint venture and greenfield investments.
Most investments captured by the order will require the government be notified about them.
Some transactions will be prohibited.
The Treasury said it anticipates exempting "certain transactions, including potentially those in publicly-traded instruments and intracompany transfers from U.S. parents to subsidiaries."
A spokesman for the Chinese Embassy in Washington did not immediately respond to a request for comment on Wednesday but the embassy said Friday the United States "habitually politicizes technology and trade issues and uses them as a tool and weapon in the name of national security."
Repbulican Senaor Marco Rubio said the Biden administration's "narrowly tailored proposal is almost laughable."
"It is riddled with loopholes, explicitly ignores the dual-use nature of important technologies, and fails to include industries China’s government deems critical."
Democratic Senator Bob Casey said Biden's order "acknowledges the urgency of the issue and will allow the U.S. to reduce some of the risks we face from bad actors like China."
The regulations will only affect future investments, not existing ones, an administration official told Reuters.
The Biden administration said it engaged with U.S. allies and partners as it developed the restrictions "and will continue coordinating closely with them to advance these goals."
It added the executive order reflects discussions with the Group of Seven countries.
It is expected to be implemented next year, a person briefed on the order said, after multiple rounds of public comment, including an initial 45-day comment period.
Regulators plan to issue an advance notice of proposed rulemaking to further define the scope of the program and a comment period to solicit public feedback before making a formal proposal.
Sources previously told Reuters investments in semiconductors that will be restricted are expected to track export control rules for China issued by the U.S. Department of Commerce in October.
Emily Benson of the Center for Strategic and International Studies (CSIS), a bipartisan policy research organization, said she expects investments in artificial intelligence to be prohibited to military users and uses, and that other investments in the sector will only require notification to the government.
Benson said the burden will fall on the administration to determine what AI falls into the military category.
"They will have to draw a line of what constitutes a military application of AI, and to define AI," said Benson, director of CSIS's project on trade and technology.
The regulations concerning AI are still in development, the person briefed on the order said.
The person said the same was also true for quantum computing but that it was expected to prohibit certain sensors and other things related to the technology.
The person added that there could be potential exemptions related to universities and research.
Reporting by David Shepardson, Andrea Shalal, Stephen Nellis, Max Cherney and Karen Freifeld; additional reporting by Idrees Ali; Editing by Lincoln Feast and Jonathan Oatis
https://www.reuters.com/world/white-hou ... 023-08-09/
"Biden signs order to ban certain tech investments in China"
By Karen Freifeld, Andrea Shalal and David Shepardson
August 9, 2023
NEW YORK/WASHINGTON, Aug 9 (Reuters) - President Joe Biden on Wednesday signed an executive order that will narrowly prohibit certain U.S. investments in sensitive technology in China and require government notification of funding in other tech sectors.
The long-awaited order authorizes the U.S. Treasury secretary to prohibit or restrict certain U.S. investments in Chinese entities in three sectors: semiconductors and microelectronics, quantum information technologies, and certain artificial intelligence systems.
Biden said in a letter to Congress he was declaring a national emergency to deal with the threat of advancement by countries like China "in sensitive technologies and products critical to the military, intelligence, surveillance, or cyber-enabled capabilities."
The proposal targets investments in Chinese companies developing software to design chips and tools to manufacture them.
The U.S., Japan and the Netherlands dominate those fields, and the Chinese government has been working to build up homegrown alternatives.
The move could fuel tensions between the world's two largest economies, although U.S. officials insisted the prohibitions were intended to address "the most acute" national security risks and not to separate the two countries' highly interdependent economies.
Senate Democratic Leader Chuck Schumer praised Biden's order, saying "for too long, American money has helped fuel the Chinese military’s rise."
"Today the United States is taking a strategic first step to ensure American investment does not go to fund Chinese military advancement."
He says Congress must enshrine restrictions in law and refine them.
Republicans said the Biden order did not go far enough.
House Foreign Affairs Committee Chairman Michael McCaul praised the move to restrict new outbound investments in China but said "the failure to include existing technology investments as well as sectors like biotechnology and energy is concerning."
The order is aimed at preventing American capital and expertise from helping develop technologies that could support China’s military modernization and undermine U.S. national security.
It is focused on private equity, venture capital, joint venture and greenfield investments.
Most investments captured by the order will require the government be notified about them.
Some transactions will be prohibited.
The Treasury said it anticipates exempting "certain transactions, including potentially those in publicly-traded instruments and intracompany transfers from U.S. parents to subsidiaries."
A spokesman for the Chinese Embassy in Washington did not immediately respond to a request for comment on Wednesday but the embassy said Friday the United States "habitually politicizes technology and trade issues and uses them as a tool and weapon in the name of national security."
Repbulican Senaor Marco Rubio said the Biden administration's "narrowly tailored proposal is almost laughable."
"It is riddled with loopholes, explicitly ignores the dual-use nature of important technologies, and fails to include industries China’s government deems critical."
Democratic Senator Bob Casey said Biden's order "acknowledges the urgency of the issue and will allow the U.S. to reduce some of the risks we face from bad actors like China."
The regulations will only affect future investments, not existing ones, an administration official told Reuters.
The Biden administration said it engaged with U.S. allies and partners as it developed the restrictions "and will continue coordinating closely with them to advance these goals."
It added the executive order reflects discussions with the Group of Seven countries.
It is expected to be implemented next year, a person briefed on the order said, after multiple rounds of public comment, including an initial 45-day comment period.
Regulators plan to issue an advance notice of proposed rulemaking to further define the scope of the program and a comment period to solicit public feedback before making a formal proposal.
Sources previously told Reuters investments in semiconductors that will be restricted are expected to track export control rules for China issued by the U.S. Department of Commerce in October.
Emily Benson of the Center for Strategic and International Studies (CSIS), a bipartisan policy research organization, said she expects investments in artificial intelligence to be prohibited to military users and uses, and that other investments in the sector will only require notification to the government.
Benson said the burden will fall on the administration to determine what AI falls into the military category.
"They will have to draw a line of what constitutes a military application of AI, and to define AI," said Benson, director of CSIS's project on trade and technology.
The regulations concerning AI are still in development, the person briefed on the order said.
The person said the same was also true for quantum computing but that it was expected to prohibit certain sensors and other things related to the technology.
The person added that there could be potential exemptions related to universities and research.
Reporting by David Shepardson, Andrea Shalal, Stephen Nellis, Max Cherney and Karen Freifeld; additional reporting by Idrees Ali; Editing by Lincoln Feast and Jonathan Oatis
https://www.reuters.com/world/white-hou ... 023-08-09/
Re: CHINA
REUTERS
"Analysis: Biden's China tech curbs to keep investors sidelined, fearing more steps"
By Kane Wu and Michael Martina
August 10, 2023
HONG KONG/WASHINGTON, Aug 10 (Reuters) - President Joe Biden's move to prohibit some U.S. technology investments in China is expected to keep investors on the sidelines, concerned that tougher measures are ahead as tensions simmer between the world's two biggest economies.
U.S. private equity and venture capital investors have already hit the brakes on sensitive technologies in China as relations have worsened since the administration of Biden's predecessor, Donald Trump, over issues from tech to China's industrial policies to national security.
Aiming to keep U.S. capital and expertise from helping China's military modernisation and harming U.S. national security, Biden's executive order on Wednesday was limited, for example by applying only to new investments.
But it will not be the end of measures to tighten scrutiny of American investments in China, which is struggling to get back on its feet since the COVID-19 pandemic, dealmakers and analysts say.
The order authorises the Treasury secretary to prohibit or restrict U.S. investments in Chinese firms in semiconductors and microelectronics, quantum information technologies and certain artificial intelligence systems.
Congress may introduce legislation expanding on Biden's restrictions, said Weiheng Chen, senior partner and head of Greater China practice at law firm Wilson Sonsini.
Indeed, congressional Republicans immediately criticised the order by Democrat Biden as not going far enough.
"Certain U.S. investors may just choose to wait for the implementation rules before making investment decisions in these covered sectors," Chen said.
SHIFT TO YUAN
Acquisitions of Chinese companies by U.S. firms have sunk almost 60% so far this year to $3.5 billion from $8.8 billion for the same period last year, according to Dealogic data, while deal value in the tech sector has plunged to $815 from $6.1 billion.
China-U.S. tensions and Beijing's regulatory crackdown on its private enterprises have prompted many fund managers to pivot from the country or shift to local-currency investments.
"The situation is already very bad for dollar-based funds to invest in China's tech sector."
"There isn't much room for things to get worse," said Beijing-based China Growth Capital partner Wayne Shiong.
Biden's move will likely make China-focussed venture capital firms feel more urgency to raise yuan funds from Chinese investors, he said.
The executive order and the prospects of a pause in private equity investments in China across the board come as Beijing seeks to attract capital to revive its slowing economy.
Pan Yuan, a researcher at the Chinese Academy of Social Sciences, a top government think tank, said despite Biden's restrictions, China will maintain an open policy to attract foreign capital.
To counter the U.S. curbs, China must focus on improving its domestic technology capabilities, Pan said.
TECH DISPUTES
China hawks in Washington blame American investors for transferring capital and valuable know-how to Chinese technology companies that could help advance Beijing's military capabilities.
Beijing, for its part, has been seeking self-sufficiency in the escalating tech disputes.
On Monday, Hua Hong Semiconductor, China's number two chip foundry, made its Shanghai market debut, raising $3 billion and joining a long queue of local chipmakers to tap the stock market to fund expansion.
In response to Biden's executive order, China's commerce ministry said it was "gravely concerned" and reserved the right to take countermeasures.
Analysts said, however, Beijing's retaliation options are limited and would unlikely escalate the matter, especially given tight scrutiny since the Trump era.
"The main Chinese reaction will be to discourage other countries from copying American actions," said Derek Scissors, senior fellow and expert on U.S.-China economic relations at the pro-business American Enterprise Institute.
"China could act in non-reciprocal fashion, retaliating somewhere other than on the investment side."
"But the executive order is barely going to do anything, and China escalating would risk turning a molehill into a mountain."
Reporting by Kane Wu in Hong Kong and Michael Martina in Washington; Additional reporting by Roxanne Liu and Ziyi Tang in Beijing, Yantoultra Ngui in Singapore and Vineet Sachdev in Bengaluru; Editing by Sumeet Chatterjee and William Mallard
https://www.reuters.com/technology/bide ... 023-08-10/
"Analysis: Biden's China tech curbs to keep investors sidelined, fearing more steps"
By Kane Wu and Michael Martina
August 10, 2023
HONG KONG/WASHINGTON, Aug 10 (Reuters) - President Joe Biden's move to prohibit some U.S. technology investments in China is expected to keep investors on the sidelines, concerned that tougher measures are ahead as tensions simmer between the world's two biggest economies.
U.S. private equity and venture capital investors have already hit the brakes on sensitive technologies in China as relations have worsened since the administration of Biden's predecessor, Donald Trump, over issues from tech to China's industrial policies to national security.
Aiming to keep U.S. capital and expertise from helping China's military modernisation and harming U.S. national security, Biden's executive order on Wednesday was limited, for example by applying only to new investments.
But it will not be the end of measures to tighten scrutiny of American investments in China, which is struggling to get back on its feet since the COVID-19 pandemic, dealmakers and analysts say.
The order authorises the Treasury secretary to prohibit or restrict U.S. investments in Chinese firms in semiconductors and microelectronics, quantum information technologies and certain artificial intelligence systems.
Congress may introduce legislation expanding on Biden's restrictions, said Weiheng Chen, senior partner and head of Greater China practice at law firm Wilson Sonsini.
Indeed, congressional Republicans immediately criticised the order by Democrat Biden as not going far enough.
"Certain U.S. investors may just choose to wait for the implementation rules before making investment decisions in these covered sectors," Chen said.
SHIFT TO YUAN
Acquisitions of Chinese companies by U.S. firms have sunk almost 60% so far this year to $3.5 billion from $8.8 billion for the same period last year, according to Dealogic data, while deal value in the tech sector has plunged to $815 from $6.1 billion.
China-U.S. tensions and Beijing's regulatory crackdown on its private enterprises have prompted many fund managers to pivot from the country or shift to local-currency investments.
"The situation is already very bad for dollar-based funds to invest in China's tech sector."
"There isn't much room for things to get worse," said Beijing-based China Growth Capital partner Wayne Shiong.
Biden's move will likely make China-focussed venture capital firms feel more urgency to raise yuan funds from Chinese investors, he said.
The executive order and the prospects of a pause in private equity investments in China across the board come as Beijing seeks to attract capital to revive its slowing economy.
Pan Yuan, a researcher at the Chinese Academy of Social Sciences, a top government think tank, said despite Biden's restrictions, China will maintain an open policy to attract foreign capital.
To counter the U.S. curbs, China must focus on improving its domestic technology capabilities, Pan said.
TECH DISPUTES
China hawks in Washington blame American investors for transferring capital and valuable know-how to Chinese technology companies that could help advance Beijing's military capabilities.
Beijing, for its part, has been seeking self-sufficiency in the escalating tech disputes.
On Monday, Hua Hong Semiconductor, China's number two chip foundry, made its Shanghai market debut, raising $3 billion and joining a long queue of local chipmakers to tap the stock market to fund expansion.
In response to Biden's executive order, China's commerce ministry said it was "gravely concerned" and reserved the right to take countermeasures.
Analysts said, however, Beijing's retaliation options are limited and would unlikely escalate the matter, especially given tight scrutiny since the Trump era.
"The main Chinese reaction will be to discourage other countries from copying American actions," said Derek Scissors, senior fellow and expert on U.S.-China economic relations at the pro-business American Enterprise Institute.
"China could act in non-reciprocal fashion, retaliating somewhere other than on the investment side."
"But the executive order is barely going to do anything, and China escalating would risk turning a molehill into a mountain."
Reporting by Kane Wu in Hong Kong and Michael Martina in Washington; Additional reporting by Roxanne Liu and Ziyi Tang in Beijing, Yantoultra Ngui in Singapore and Vineet Sachdev in Bengaluru; Editing by Sumeet Chatterjee and William Mallard
https://www.reuters.com/technology/bide ... 023-08-10/
Re: CHINA
REUTERS
"US investors flag retaliation risks after Biden's China tech curbs"
Reuters
August 11, 2023
Aug 11 (Reuters) - While the market mostly shrugged off President Joe Biden's move to prohibit some U.S. technology investments in China, U.S. investors said they were worried Beijing would retaliate or pull back from buying American technology.
Aiming to protect national security and prevent U.S. capital and expertise from aiding China's military modernization, Biden this week issued an executive order barring some new U.S. investments in China in sensitive technologies including computer chips, while regulating others.
U.S. investors were unfazed by the initial news, saying that the restrictions, at first blush, were more limited than feared and unlikely to extend to passive investments in public Chinese stocks.
But several portfolio managers said the bigger worry was whether China would strike back, as it has in the past.
"Much depends on how China decides to react to that."
"The very significant technology war between the countries is a big negative and the administration seemed to be trying to make that announcement without making too many waves with China," said Rick Meckler, partner at Cherry Lane Investments in New Jersey.
The iShares MSCI China Exchange Traded Fund, one of the largest ETFs of U.S.-listed China-based companies, finished up 0.7% on Thursday, while the rest of Wall Street finished flat.
In response to Biden's executive order, China's commerce ministry said it was "gravely concerned" and reserved the right to take counter-measures.
Some China analysts said Beijing's options are limited and would unlikely escalate the matter.
Others, though, thought that view was too optimistic.
China in May targeted U.S. chip maker Micron Technology after Washington imposed a series of export controls on American components and chipmaker tools to China, and the U.S. has accused Beijing of penalizing other U.S. companies amid growing tensions between the two global economic powerhouses.
"It is naïve to think that there won't be some type of retaliation from China," said Tom Plumb, CEO of mutual fund Plumb Funds.
China could restrict exports of rare earths used in consumer electronics, electric vehicles, and other components, or target other U.S. technology companies, Plumb said.
SELF-SUFFICIENCY
China hawks in Washington say American investors have transferred capital and valuable know-how to Chinese technology companies that could help advance Beijing's military capabilities.
Beijing, for its part, has been seeking self-sufficiency in the intensifying tech disputes, which could also stem the flow of capital into U.S. companies and markets.
"This is obviously going to put China in a position where they're going to try to reduce their dependency on any U.S. company for higher levels of technology," said Plumb.
U.S. private equity and venture capital investors, which have already pulled back from China, are likely to sit on the sidelines while they await more clarity on how the rules will be implemented, Reuters reported on Wednesday.
Some portfolio investors are also reducing their exposure to China.
Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, said some clients had already asked for reduced or zero China exposure via stocks, bonds and ETFs.
"After the government's announcement, I suspect that we may receive a few more similar requests," he said.
Phillip Wool, a co-portfolio manager of Rayliant Quantamental China Equity ETF, said U.S.-China tensions were causing investors to miss out on China growth.
"The bigger risk for investors is not allocating to a market where valuations are so low - relative to other equity markets and China’s own history - and where there are plenty of companies with strong fundamentals undergoing rapid growth."
Reporting by Shashwat Chauhan, Amruta Khandekar, Chibuike Oguh, Laura Matthews, Herbert Lash, Davide Barbuscia; writing by Michelle Price; editing by Grant McCool
https://www.reuters.com/technology/us-i ... 023-08-11/
"US investors flag retaliation risks after Biden's China tech curbs"
Reuters
August 11, 2023
Aug 11 (Reuters) - While the market mostly shrugged off President Joe Biden's move to prohibit some U.S. technology investments in China, U.S. investors said they were worried Beijing would retaliate or pull back from buying American technology.
Aiming to protect national security and prevent U.S. capital and expertise from aiding China's military modernization, Biden this week issued an executive order barring some new U.S. investments in China in sensitive technologies including computer chips, while regulating others.
U.S. investors were unfazed by the initial news, saying that the restrictions, at first blush, were more limited than feared and unlikely to extend to passive investments in public Chinese stocks.
But several portfolio managers said the bigger worry was whether China would strike back, as it has in the past.
"Much depends on how China decides to react to that."
"The very significant technology war between the countries is a big negative and the administration seemed to be trying to make that announcement without making too many waves with China," said Rick Meckler, partner at Cherry Lane Investments in New Jersey.
The iShares MSCI China Exchange Traded Fund, one of the largest ETFs of U.S.-listed China-based companies, finished up 0.7% on Thursday, while the rest of Wall Street finished flat.
In response to Biden's executive order, China's commerce ministry said it was "gravely concerned" and reserved the right to take counter-measures.
Some China analysts said Beijing's options are limited and would unlikely escalate the matter.
Others, though, thought that view was too optimistic.
China in May targeted U.S. chip maker Micron Technology after Washington imposed a series of export controls on American components and chipmaker tools to China, and the U.S. has accused Beijing of penalizing other U.S. companies amid growing tensions between the two global economic powerhouses.
"It is naïve to think that there won't be some type of retaliation from China," said Tom Plumb, CEO of mutual fund Plumb Funds.
China could restrict exports of rare earths used in consumer electronics, electric vehicles, and other components, or target other U.S. technology companies, Plumb said.
SELF-SUFFICIENCY
China hawks in Washington say American investors have transferred capital and valuable know-how to Chinese technology companies that could help advance Beijing's military capabilities.
Beijing, for its part, has been seeking self-sufficiency in the intensifying tech disputes, which could also stem the flow of capital into U.S. companies and markets.
"This is obviously going to put China in a position where they're going to try to reduce their dependency on any U.S. company for higher levels of technology," said Plumb.
U.S. private equity and venture capital investors, which have already pulled back from China, are likely to sit on the sidelines while they await more clarity on how the rules will be implemented, Reuters reported on Wednesday.
Some portfolio investors are also reducing their exposure to China.
Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, said some clients had already asked for reduced or zero China exposure via stocks, bonds and ETFs.
"After the government's announcement, I suspect that we may receive a few more similar requests," he said.
Phillip Wool, a co-portfolio manager of Rayliant Quantamental China Equity ETF, said U.S.-China tensions were causing investors to miss out on China growth.
"The bigger risk for investors is not allocating to a market where valuations are so low - relative to other equity markets and China’s own history - and where there are plenty of companies with strong fundamentals undergoing rapid growth."
Reporting by Shashwat Chauhan, Amruta Khandekar, Chibuike Oguh, Laura Matthews, Herbert Lash, Davide Barbuscia; writing by Michelle Price; editing by Grant McCool
https://www.reuters.com/technology/us-i ... 023-08-11/
Re: CHINA
REUTERS
"US Commerce chief heading to China with aim of boosting business ties"
By David Shepardson and Trevor Hunnicutt
August 25, 2023
WASHINGTON, Aug 25 (Reuters) - U.S. Commerce Secretary Gina Raimondo visits China for four days starting Sunday, aiming to boost business ties between the world's largest two economies even as the Biden administration has taken a series of steps to prevent exports of sensitive American technology.
Raimondo has repeatedly said the United States does not want to "decouple" from China, but also noted she has aggressively placed Chinese companies on an export control list.
"There’s a lot of benefit to doing business (with China) where we can."
"Having said that, we have to protect what we must, and be eyes wide open about the threats and strategic competition," Raimondo said in July.
Tensions are high as the United States works with allies to block China's access to vital equipment needed to keep its chip industry competitive and Beijing restricts shipments from prominent U.S. firms like planemaker Boeing and chip company Micron Technology.
Ahead of Raimondo's arrival in Beijing on Sunday, several recent announcements from the U.S. have likely pleased Chinese officials.
On Tuesday, China welcomed the U.S. decision to lift export control restrictions on 27 Chinese entities, saying it is conducive to normal trade between Chinese and U.S. firms.
And on Wednesday the United States said it is seeking a six-month extension to a decades-old science and technology agreement with China, a deal Chinese officials have expressed a desire to extend.
The two biggest economies in the world used to be each other's largest trade partners, but Washington is now trading more with neighboring Canada and Mexico, while Beijing is trading more with Southeast Asia.
The visit comes after a blitz of intense diplomacy over several months by U.S. President Joe Biden’s top aides aimed at easing tensions between Washington and Beijing.
Officials are hoping to see concrete signs of progress in the relationship, in potential areas ranging from trade to climate, in time for a potential face-to-face meeting between Biden and Chinese counterpart Xi Jinping before the end of the year.
The semiconductor chip industry is eager to protect its profits in China as the Biden administration considers another round of restrictions on chip exports to China.
Last year, China accounted for $180 billion in semiconductor purchases, more than a third the worldwide total of $555.9 billion and the largest single market, according to Semiconductor Industry Association.
Raimondo in May said the United States "won't tolerate" China's effective ban on purchases of Micron memory chips and is working closely with allies to address such "economic coercion."
Raimondo said in July the Biden administration is seeking to carefully target U.S. controls on exports to China, but rules will cost firms some revenue.
Restrictions should not be so broad "that you deny American companies revenue and China can get the product elsewhere, or China can get the product from other countries," Raimondo said.
Rules "will deny some revenue to American companies, but we think it's worth it."
One big open question is when will China resume deliveries of Boeing 737 MAX passenger jets.
Raimondo, who has spoken to Boeing executives on numerous occasions, said in 2021 the Chinese government was preventing its domestic airlines from buying U.S.-manufactured Boeing airplanes.
"There's tens of billions of dollars of planes that Chinese airlines want to buy, but the Chinese government is standing in the way," she said.
Raimondo’s trip may be the last face-to-face interaction between top U.S. officials and their Chinese counterparts ahead of Vice President Kamala Harris’ Sept. 4-7 trip to the ASEAN meetings of Southeast Asian countries, Biden’s Sept. 7-10 trip to India for the Group of 20 meetings and the annual gathering of world leaders at the United Nations later in September.
On the sidelines of those meetings, Biden and Harris are expected to spend time wooing neighboring countries anxious about China’s assertive posture in the Indo-Pacific and declining economy.
Reporting by David Shepardson and Trevor Hunnicutt; editing by Jonathan Oatis
https://www.reuters.com/markets/us-comm ... 023-08-25/
"US Commerce chief heading to China with aim of boosting business ties"
By David Shepardson and Trevor Hunnicutt
August 25, 2023
WASHINGTON, Aug 25 (Reuters) - U.S. Commerce Secretary Gina Raimondo visits China for four days starting Sunday, aiming to boost business ties between the world's largest two economies even as the Biden administration has taken a series of steps to prevent exports of sensitive American technology.
Raimondo has repeatedly said the United States does not want to "decouple" from China, but also noted she has aggressively placed Chinese companies on an export control list.
"There’s a lot of benefit to doing business (with China) where we can."
"Having said that, we have to protect what we must, and be eyes wide open about the threats and strategic competition," Raimondo said in July.
Tensions are high as the United States works with allies to block China's access to vital equipment needed to keep its chip industry competitive and Beijing restricts shipments from prominent U.S. firms like planemaker Boeing and chip company Micron Technology.
Ahead of Raimondo's arrival in Beijing on Sunday, several recent announcements from the U.S. have likely pleased Chinese officials.
On Tuesday, China welcomed the U.S. decision to lift export control restrictions on 27 Chinese entities, saying it is conducive to normal trade between Chinese and U.S. firms.
And on Wednesday the United States said it is seeking a six-month extension to a decades-old science and technology agreement with China, a deal Chinese officials have expressed a desire to extend.
The two biggest economies in the world used to be each other's largest trade partners, but Washington is now trading more with neighboring Canada and Mexico, while Beijing is trading more with Southeast Asia.
The visit comes after a blitz of intense diplomacy over several months by U.S. President Joe Biden’s top aides aimed at easing tensions between Washington and Beijing.
Officials are hoping to see concrete signs of progress in the relationship, in potential areas ranging from trade to climate, in time for a potential face-to-face meeting between Biden and Chinese counterpart Xi Jinping before the end of the year.
The semiconductor chip industry is eager to protect its profits in China as the Biden administration considers another round of restrictions on chip exports to China.
Last year, China accounted for $180 billion in semiconductor purchases, more than a third the worldwide total of $555.9 billion and the largest single market, according to Semiconductor Industry Association.
Raimondo in May said the United States "won't tolerate" China's effective ban on purchases of Micron memory chips and is working closely with allies to address such "economic coercion."
Raimondo said in July the Biden administration is seeking to carefully target U.S. controls on exports to China, but rules will cost firms some revenue.
Restrictions should not be so broad "that you deny American companies revenue and China can get the product elsewhere, or China can get the product from other countries," Raimondo said.
Rules "will deny some revenue to American companies, but we think it's worth it."
One big open question is when will China resume deliveries of Boeing 737 MAX passenger jets.
Raimondo, who has spoken to Boeing executives on numerous occasions, said in 2021 the Chinese government was preventing its domestic airlines from buying U.S.-manufactured Boeing airplanes.
"There's tens of billions of dollars of planes that Chinese airlines want to buy, but the Chinese government is standing in the way," she said.
Raimondo’s trip may be the last face-to-face interaction between top U.S. officials and their Chinese counterparts ahead of Vice President Kamala Harris’ Sept. 4-7 trip to the ASEAN meetings of Southeast Asian countries, Biden’s Sept. 7-10 trip to India for the Group of 20 meetings and the annual gathering of world leaders at the United Nations later in September.
On the sidelines of those meetings, Biden and Harris are expected to spend time wooing neighboring countries anxious about China’s assertive posture in the Indo-Pacific and declining economy.
Reporting by David Shepardson and Trevor Hunnicutt; editing by Jonathan Oatis
https://www.reuters.com/markets/us-comm ... 023-08-25/
Re: CHINA
REUTERS
"Huawei's new chip breakthrough likely to trigger closer US scrutiny, analysts say"
By David Kirton and Max A. Cherney
September 5, 2023
SHENZHEN, China/SAN FRANCISCO, California, Sept 5 (Reuters) - Huawei Technologies' breakthrough in making an advanced chip underscores China's determination and capacity for fighting back against U.S. sanctions, but the efforts are likely very costly and could prompt Washington to tighten curbs, analysts said.
Huawei unexpectedly unveiled the latest Mate 60 Pro smartphone last week during U.S. Commerce Secretary Gina Raimondo's visit in China, as the government readies a new $40-billion investment fund to bolster its developing chip sector.
The Mate 60 Pro is powered by its proprietary chip Kirin 9000s and manufactured by the country's top contract chipmaker SMIC using an advanced 7 nanometre (nm) technology, according to a teardown by Ottawa-headquartered TechInsights.
Its findings and claims by early users about the phone's powerful performance indicate China is making some headway into developing high-end chips, even as Washington has over the recent years ramped up sanctions to cut its access to advanced chipmaking tools.
It "demonstrates the technical progress China’s semiconductor industry has been able to make without EUV tools."
"The difficulty of this achievement also shows the resilience of the country’s chip technological ability," TechInsights analyst Dan Hutcheson said.
EUV refers to extreme ultraviolet lithography and is used to make 7 nm or more advanced chips.
"At the same time, it is a great geopolitical challenge to the countries who have sought to restrict its access to critical manufacturing technologies."
"The result may likely be even greater restrictions than what exist today."
Jefferies analysts said TechInsights' findings could trigger a probe from the U.S. Commerce Department's Bureau of Industry and Security, create more debate in the U.S. about the effectiveness of sanctions and prompt the Congress to include even harsher tech sanctions in a competition bill it is preparing against China.
"Overall the US-China tech war is likely to escalate," they said in a note.
A U.S. Department of Commerce representative did not immediately reply to a request for comment on Tuesday morning.
Huawei declined to comment.
SMIC and China's State Council, which handles press queries on behalf of the Chinese government, did not immediately respond to requests for comments.
LIMITED ACHIEVEMENT
The most advanced chip SMIC had previously been known for making was 14nm, as it was barred by Washington in late 2020 from obtaining an EUV machine from Dutch firm ASML.
But TechInsights last year said it believed SMIC had managed to produce 7 nm chips by tweaking simpler DUV machines it could still purchase freely from ASML.
Some analysts including Jefferies' said there was also a possibility Huawei had purchased the tech and equipment from SMIC to make the chip rather than doing it in collaboration.
Whoever is making the chip, Tilly Zhang, an analyst at Gavekal Dragonomics, downplayed the success, citing a low yield rate which reduces the number of useable chips from each wafer and raises costs, and new export controls imposed by the Netherlands that will limit SMIC's access to more immersion DUV machine.
"They have just demonstrated that they are willing to accept much higher costs than are normally considered worthwhile ..."
"It is only the combination of Huawei’s own large financial resources and generous government subsidies that could allow it to sell phones using these chips at normal market prices," Zhang said.
Reuters reported on Tuesday that China is set to launch a new state-backed investment fund that aims to raise about $40 billion for its chip sector, as the country ramps up efforts to catch up with the U.S. and other rivals.
Some research firms forecast SMIC's 7 nm process has an yield rate below 50%, versus the industry norm of 90% or more, and it would limit shipments to around 2-4 million chips, not enough for Huawei to regain its former smartphone market dominance.
Jefferies analysts reckon Huawei is preparing to ship ten million units of the Mate 60 Pro, though it may struggle to support that quantity with China-made 7 nm chips.
In that case it could turn to 10 nm chips, but with an estimated 20% yield, which refers to the number of working chips on each silicon wafer, Jefferies said, it would be far below the 90% for most consumer devices.
"The (U.S.) controls are imposing high costs for producing controlled technologies in China," said Doug Fuller, a chip researcher at the Copenhagen Business School, adding that the Chinese government was likely footing the bill.
Reporting by David Kirton and Max Cherney; writing by Brenda Goh; Editing by Miyoung Kim and Nick Zieminski
https://www.reuters.com/technology/huaw ... 023-09-05/
"Huawei's new chip breakthrough likely to trigger closer US scrutiny, analysts say"
By David Kirton and Max A. Cherney
September 5, 2023
SHENZHEN, China/SAN FRANCISCO, California, Sept 5 (Reuters) - Huawei Technologies' breakthrough in making an advanced chip underscores China's determination and capacity for fighting back against U.S. sanctions, but the efforts are likely very costly and could prompt Washington to tighten curbs, analysts said.
Huawei unexpectedly unveiled the latest Mate 60 Pro smartphone last week during U.S. Commerce Secretary Gina Raimondo's visit in China, as the government readies a new $40-billion investment fund to bolster its developing chip sector.
The Mate 60 Pro is powered by its proprietary chip Kirin 9000s and manufactured by the country's top contract chipmaker SMIC using an advanced 7 nanometre (nm) technology, according to a teardown by Ottawa-headquartered TechInsights.
Its findings and claims by early users about the phone's powerful performance indicate China is making some headway into developing high-end chips, even as Washington has over the recent years ramped up sanctions to cut its access to advanced chipmaking tools.
It "demonstrates the technical progress China’s semiconductor industry has been able to make without EUV tools."
"The difficulty of this achievement also shows the resilience of the country’s chip technological ability," TechInsights analyst Dan Hutcheson said.
EUV refers to extreme ultraviolet lithography and is used to make 7 nm or more advanced chips.
"At the same time, it is a great geopolitical challenge to the countries who have sought to restrict its access to critical manufacturing technologies."
"The result may likely be even greater restrictions than what exist today."
Jefferies analysts said TechInsights' findings could trigger a probe from the U.S. Commerce Department's Bureau of Industry and Security, create more debate in the U.S. about the effectiveness of sanctions and prompt the Congress to include even harsher tech sanctions in a competition bill it is preparing against China.
"Overall the US-China tech war is likely to escalate," they said in a note.
A U.S. Department of Commerce representative did not immediately reply to a request for comment on Tuesday morning.
Huawei declined to comment.
SMIC and China's State Council, which handles press queries on behalf of the Chinese government, did not immediately respond to requests for comments.
LIMITED ACHIEVEMENT
The most advanced chip SMIC had previously been known for making was 14nm, as it was barred by Washington in late 2020 from obtaining an EUV machine from Dutch firm ASML.
But TechInsights last year said it believed SMIC had managed to produce 7 nm chips by tweaking simpler DUV machines it could still purchase freely from ASML.
Some analysts including Jefferies' said there was also a possibility Huawei had purchased the tech and equipment from SMIC to make the chip rather than doing it in collaboration.
Whoever is making the chip, Tilly Zhang, an analyst at Gavekal Dragonomics, downplayed the success, citing a low yield rate which reduces the number of useable chips from each wafer and raises costs, and new export controls imposed by the Netherlands that will limit SMIC's access to more immersion DUV machine.
"They have just demonstrated that they are willing to accept much higher costs than are normally considered worthwhile ..."
"It is only the combination of Huawei’s own large financial resources and generous government subsidies that could allow it to sell phones using these chips at normal market prices," Zhang said.
Reuters reported on Tuesday that China is set to launch a new state-backed investment fund that aims to raise about $40 billion for its chip sector, as the country ramps up efforts to catch up with the U.S. and other rivals.
Some research firms forecast SMIC's 7 nm process has an yield rate below 50%, versus the industry norm of 90% or more, and it would limit shipments to around 2-4 million chips, not enough for Huawei to regain its former smartphone market dominance.
Jefferies analysts reckon Huawei is preparing to ship ten million units of the Mate 60 Pro, though it may struggle to support that quantity with China-made 7 nm chips.
In that case it could turn to 10 nm chips, but with an estimated 20% yield, which refers to the number of working chips on each silicon wafer, Jefferies said, it would be far below the 90% for most consumer devices.
"The (U.S.) controls are imposing high costs for producing controlled technologies in China," said Doug Fuller, a chip researcher at the Copenhagen Business School, adding that the Chinese government was likely footing the bill.
Reporting by David Kirton and Max Cherney; writing by Brenda Goh; Editing by Miyoung Kim and Nick Zieminski
https://www.reuters.com/technology/huaw ... 023-09-05/
Re: CHINA
REUTERS
"US investors want clarity on Biden's vague curbs on China tech"
By Pete Schroeder, Michelle Price and Carolina Mandl
September 27, 2023
WASHINGTON/NEW YORK, Sept 27 (Reuters) - U.S. financial firms are pushing for greater clarity on proposed new rules curbing U.S. investments in some China technology sectors which they say are too vague and put the onus of compliance on investors.
Aiming to protect national security and prevent U.S. capital from aiding China's military, President Joe Biden issued an executive order last month restricting new U.S. investments in sensitive Chinese technologies.
The Treasury Department subsequently kicked off a rule-making process to implement the order, and financial firms have been rushing to meet a Sept. 28 to provide input.
The rules are expected to be implemented sometime next year.
The proposed rule applies to U.S. persons - including U.S. citizens, residents, businesses and U.S. units of overseas businesses.
They must notify the Treasury when making certain investments in China in the semiconductors and microelectronics, artificial intelligence and quantum information technologies sectors, and bans other such investments altogether.
In addition to venture capital and private equity firms, hedge funds, banks and potentially funds that track indexes are likely to be affected by the proposal, which financial industry executives and lawyers complain is broad and ambiguous.
Among their key concerns: how the rules would apply to U.S. persons; which specific Chinese entities would be subject to the restrictions; and better defining a proposed exemption for publicly traded securities.
"The scope is pretty broad," said Timothy Keeler, a partner at law firm Mayer Brown, noting it applies to Chinese entities operating beyond China.
"It could apply to companies that are outside of China but are subsidiaries of Chinese companies or controlled by a Chinese person."
While the U.S. already has restrictions on some Chinese investments in the U.S. and U.S. investments in China, the order creates a new program.
Unlike a process conducted by the Committee on Foreign Investment in the United States, a panel comprising U.S. government agencies, the new program will not involve case-by-case reviews of investments.
And in contrast to sanctions, it does not envisage a list of restricted entities or companies.
That means investors have to figure out which investments come under the scope of the new rule and how to comply, creating significant compliance costs and legal risks.
"That puts a fair amount of burden on an investor," said a former Treasury official.
They may also bar U.S. persons from "knowingly directing" covered transactions by non-U.S. persons.
But the threshold for knowledge, or what directing means, is unclear.
"We are hearing a lot about the issue of a U.S. person directing the activities of a non-U.S. person," said Jen Fernandez, a partner at law firm Sidley Austin.
"At what level does 'directing' kick in and what does that mean for these non-U.S. private equity funds that may have a dual national sitting as a partner?"
The program proposes exempting publicly traded securities and index and mutual funds, but financial firms want those securities to be more tightly defined.
One key question is whether shares in initial public offerings allocated prior to trading would be carved out.
To address these and other issues, some firms plan to push for a list of restricted entities and investments, similar to a sanctions regime.
Former Securities and Exchange Commission chair Jay Clayton, now an adviser with law firm Sullivan & Cromwell, voiced this idea when he told a House of Representatives committee on China this month that "Wall Street responds very quickly" to lists of barred entities.
Some sources, though, said they doubted the Treasury would go that route, which would reduce the program's flexibility and, since the target is cutting-edge technology, quickly become outdated.
"That just doesn't appear to be where this process is heading," said Keeler.
DE-RISKING
A Treasury spokesperson did not respond to a request for comment but said in the proposal that it welcomes input.
The rules are necessary because U.S. investments can be exploited to accelerate the development of sensitive technologies that threaten U.S. national security, the Treasury and administration has said.
Financial firms say they support the administration's national security goals but worry about increased liability and the economic costs of restricting capital flows.
U.S.-China tensions have already seen acquisitions of Chinese companies by U.S. firms sink almost 60% from January this year through early August compared with the same period last year.
"Protecting U.S. national security is a paramount obligation of the federal government, but as the Treasury states, maintaining global capital flows need not be inconsistent with that," said Peter Matheson, a managing director at the Securities Industry and Financial Markets Association, a financial industry lobby group.
Lobbying to contain the rules, however, is politically sensitive, especially because China hawks in Congress are pushing bills to make the restrictions tougher.
Given the uncertainty, companies may start avoiding the covered sectors altogether, said Fernandez.
"I do think we’re going to see a lot of de-risking," she added.
Reporting by Pete Schroeder and Carol Mandl; Writing and reporting by Michelle Price; Editing by Deepa Babington
https://www.reuters.com/technology/us-i ... 023-09-27/
"US investors want clarity on Biden's vague curbs on China tech"
By Pete Schroeder, Michelle Price and Carolina Mandl
September 27, 2023
WASHINGTON/NEW YORK, Sept 27 (Reuters) - U.S. financial firms are pushing for greater clarity on proposed new rules curbing U.S. investments in some China technology sectors which they say are too vague and put the onus of compliance on investors.
Aiming to protect national security and prevent U.S. capital from aiding China's military, President Joe Biden issued an executive order last month restricting new U.S. investments in sensitive Chinese technologies.
The Treasury Department subsequently kicked off a rule-making process to implement the order, and financial firms have been rushing to meet a Sept. 28 to provide input.
The rules are expected to be implemented sometime next year.
The proposed rule applies to U.S. persons - including U.S. citizens, residents, businesses and U.S. units of overseas businesses.
They must notify the Treasury when making certain investments in China in the semiconductors and microelectronics, artificial intelligence and quantum information technologies sectors, and bans other such investments altogether.
In addition to venture capital and private equity firms, hedge funds, banks and potentially funds that track indexes are likely to be affected by the proposal, which financial industry executives and lawyers complain is broad and ambiguous.
Among their key concerns: how the rules would apply to U.S. persons; which specific Chinese entities would be subject to the restrictions; and better defining a proposed exemption for publicly traded securities.
"The scope is pretty broad," said Timothy Keeler, a partner at law firm Mayer Brown, noting it applies to Chinese entities operating beyond China.
"It could apply to companies that are outside of China but are subsidiaries of Chinese companies or controlled by a Chinese person."
While the U.S. already has restrictions on some Chinese investments in the U.S. and U.S. investments in China, the order creates a new program.
Unlike a process conducted by the Committee on Foreign Investment in the United States, a panel comprising U.S. government agencies, the new program will not involve case-by-case reviews of investments.
And in contrast to sanctions, it does not envisage a list of restricted entities or companies.
That means investors have to figure out which investments come under the scope of the new rule and how to comply, creating significant compliance costs and legal risks.
"That puts a fair amount of burden on an investor," said a former Treasury official.
They may also bar U.S. persons from "knowingly directing" covered transactions by non-U.S. persons.
But the threshold for knowledge, or what directing means, is unclear.
"We are hearing a lot about the issue of a U.S. person directing the activities of a non-U.S. person," said Jen Fernandez, a partner at law firm Sidley Austin.
"At what level does 'directing' kick in and what does that mean for these non-U.S. private equity funds that may have a dual national sitting as a partner?"
The program proposes exempting publicly traded securities and index and mutual funds, but financial firms want those securities to be more tightly defined.
One key question is whether shares in initial public offerings allocated prior to trading would be carved out.
To address these and other issues, some firms plan to push for a list of restricted entities and investments, similar to a sanctions regime.
Former Securities and Exchange Commission chair Jay Clayton, now an adviser with law firm Sullivan & Cromwell, voiced this idea when he told a House of Representatives committee on China this month that "Wall Street responds very quickly" to lists of barred entities.
Some sources, though, said they doubted the Treasury would go that route, which would reduce the program's flexibility and, since the target is cutting-edge technology, quickly become outdated.
"That just doesn't appear to be where this process is heading," said Keeler.
DE-RISKING
A Treasury spokesperson did not respond to a request for comment but said in the proposal that it welcomes input.
The rules are necessary because U.S. investments can be exploited to accelerate the development of sensitive technologies that threaten U.S. national security, the Treasury and administration has said.
Financial firms say they support the administration's national security goals but worry about increased liability and the economic costs of restricting capital flows.
U.S.-China tensions have already seen acquisitions of Chinese companies by U.S. firms sink almost 60% from January this year through early August compared with the same period last year.
"Protecting U.S. national security is a paramount obligation of the federal government, but as the Treasury states, maintaining global capital flows need not be inconsistent with that," said Peter Matheson, a managing director at the Securities Industry and Financial Markets Association, a financial industry lobby group.
Lobbying to contain the rules, however, is politically sensitive, especially because China hawks in Congress are pushing bills to make the restrictions tougher.
Given the uncertainty, companies may start avoiding the covered sectors altogether, said Fernandez.
"I do think we’re going to see a lot of de-risking," she added.
Reporting by Pete Schroeder and Carol Mandl; Writing and reporting by Michelle Price; Editing by Deepa Babington
https://www.reuters.com/technology/us-i ... 023-09-27/