government to force the rest of the world to comply with its own export controls on Huawei. inputs, so FDPR effectively allowed the U.S. Almost every part of the global semiconductor supply chain has significant U.S. technology to fabricate chips must apply for a license in order to sell to Huawei. In this case, the change meant that any company in the world that uses U.S. technology in their production processes to comply with U.S. To plug some of these holes, controls on Huawei were then expanded to include a new Entity List Foreign Direct Product Rule (FDPR), which requires companies that use controlled U.S. American firms were also sometimes granted licenses to sell low-end chips to Huawei. (ZTE was later removed.) But that move proved ineffective at cutting off Huawei’s access to the advanced semiconductors used in 5G equipment, because the company could still purchase advanced logic chips from foreign fabrication facilities, known as fabs, in Taiwan or South Korea. This happened when each of the firms was added to the Commerce Department’s Entity List, which bans companies from buying controlled U.S. The first layer involved the direct sale of American-fabricated semiconductors to specific Chinese companies, initially ZTE and then Huawei. These policies have plugged holes in existing regulations, expanded the scope of companies covered, and-perhaps most importantly-deepened how many layers into the supply chain restrictions go. government has experimented with and iterated on new restrictions for China on semiconductors. How We Got Hereįor more than four years, the U.S. Understanding the different sides of that bet requires looking at the different layers of restrictions and the knock-on effects they’re likely to have around the world. government wins that bet will go a long way toward determining the future balance of global economic and technological power. government is betting that it can so deeply undermine China’s semiconductor fabrication capabilities that it won’t matter how motivated or well-resourced China’s efforts are to create its own semiconductor industry-they simply won’t be able to catch up. That debate centered on a perceived trade-off between two competing goals: damaging Chinese capabilities today versus maintaining American leverage in the future. The new restrictions also attempt to settle a long-running debate within U.S. Matt Sheehan is a fellow at the Carnegie Endowment for International Peace, where his research focuses on global technology issues, with a specialization in China’s artificial intelligence ecosystem.
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