US wants allies to cut chip-related China exports amid Huawei alarm

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The US is pushing allies in Europe and Asia to tighten restrictions on exports of chip-related technology and tools to China amid rising concerns about Huawei’s development of advanced semiconductors.

Washington wants Japan, South Korea and the Netherlands to use existing export controls more aggressively, including stopping engineers from their countries servicing chipmaking tools at advanced semiconductor fabs in China, according to five people familiar with the conversations.

The Biden administration introduced sweeping export controls in 2022 that included a ban on “US persons” — American nationals and companies — from providing direct or indirect support to certain advanced chip factories in China. But there are far fewer restrictions preventing Chinese groups from hiring engineers from the allies.

“To make the controls more effective against China and to level the playing field for US industry, the allies need to prohibit their companies from providing services that support the production of advanced node integrated circuits in China,” said Kevin Wolf, an export control expert at the law firm Akin Gump.  

The US has become increasingly concerned about the speed with which Chinese groups are developing advanced chips despite the tougher American controls.

When commerce secretary Gina Raimondo visited China last year, Huawei released the Mate 60 Pro, a phone that included an advanced chip that surprised export control experts in the US government.

Washington also wants the allies to make it harder for China to circumvent US restrictions. In particular, they want them to make it more difficult for companies from third countries to supply China with items that include technology produced in Japan, South Korea or the Netherlands.

The US uses an expansive tool called the “Foreign Direct Product Rule” to target Huawei. It enables the commerce department to block non-US companies from supplying the company with items containing American technology even if it is made outside the US. But the allies have not implemented measures that would have similar impact.

One person familiar with the situation said the US was not asking the allies to create new mechanisms along the lines of the FDPR but just wanted them to use existing export control regimes to tackle the issue.

The White House and commerce department declined to comment. Japan’s ministry for economy, trade and industry and the Dutch government also declined to comment.

South Korea’s ministry of industry, trade and energy said it was “not aware” of any US request to toughen its export controls.

It remains unclear how the allies will respond. They tightened controls on exports of chip-related technology after the 2022 American controls. Some Asian companies are frustrated that the US continues to let some of its companies, such as Qualcomm, to supply Huawei with chips at the same time that Washington is putting pressure on allies.

Some officials in allied countries have also argued that having engineers at Chinese groups is necessary to help them monitor local activity, according to one of the people involved in the discussions.

Japan last year imposed restrictions on 23 types of chipmaking tools. At the time, Japanese officials said the restrictions went further than those imposed by the US since exporters would need licences for all regions, giving the trade ministry far-reaching oversight. But some officials said there was a lack of transparency into how tough Japan is actually being when it came to implementing the export controls.

Many Japanese companies have significantly cut ties with Huawei, but the Chinese group remains a member of Keidanren, the country’s most influential business lobby group. 

EU trade commissioner Valdis Dombrovskis told the Financial Times that the bloc would be reluctant to restrict European nationals from working in China. “This topic on talent is a rather more fundamental question of personal freedom. That is an area where we need to tread very carefully,” Dombrovskis said.

Additional reporting by Song Jung-a in Seoul