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The US is urging its allies in Europe and Asia to tighten restrictions on exports of chip technology and tools to China as concerns grow over Huawei’s development of advanced semiconductors.
Washington wants Japan, South Korea and the Netherlands to more aggressively use existing export controls and prevent engineers from their countries from servicing chip-making tools at advanced semiconductor factories in China, according to five people familiar with the talks.
The Biden administration introduced sweeping export controls in 2022 that included a ban on “U.S. persons” – American nationals and companies – from directly or indirectly supporting certain advanced chip factories in China. But there are far fewer restrictions preventing Chinese companies from hiring engineers from allies.
“To make controls on China more effective and level the playing field for U.S. industry, allies must prohibit their companies from providing services that support the production of advanced node ICs in China,” said Kevin Wolf, an export control expert at the law firm Akin Gump.
The US is increasingly concerned about the speed at which Chinese companies are developing advanced chips despite stricter American controls.
When Commerce Secretary Gina Raimondo visited China last year, Huawei unveiled the Mate 60 Pro, a phone with an advanced chip that surprised U.S. government export control experts.
Washington also wants allies to make it harder for China to circumvent U.S. restrictions. In particular, they want to make it more difficult for companies from third countries to supply China with items that contain technology manufactured in Japan, South Korea or the Netherlands.
The US is using a far-reaching tool called the Foreign Direct Product Rule to target Huawei. It allows the Commerce Department to prevent non-U.S. companies from supplying the company with items that contain American technology, even if they were manufactured outside the United States. But allies have not taken measures that would have a similar effect.
A person familiar with the situation said the U.S. is not asking allies to create new mechanisms along the lines of the FDPR, but simply wants them to use existing export control regimes to address the problem.
The White House and the Commerce Department declined to comment. The Japanese Ministry of Economy, Trade and Industry and the Dutch government also declined to comment.
South Korea’s Ministry of Industry, Trade and Energy said it had “no knowledge” of a request from the United States to tighten its export controls.
It remains unclear how the allies will react. After the American controls in 2022, they tightened export controls on chip technology. Some Asian companies are frustrated that the US continues to allow some of their 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 it is necessary to have engineers working with Chinese groups to help them monitor local activities, according to one of the people involved in the discussions.
Japan imposed restrictions on 23 types of chip-making tools last year. At the time, Japanese officials said the restrictions went further than those imposed by the U.S. because exporters would need licenses for all regions, giving the Commerce Ministry broad control. But some officials said there was a lack of transparency about how tough Japan actually was in implementing export controls.
Many Japanese companies have significantly cut ties with Huawei, but the Chinese company 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 hesitate to ban European nationals from working in China. “This talent issue is more about a more fundamental question of personal freedom. This is an area where we have to proceed very carefully,” Dombrovskis said.
Additional reporting by Song Jung-a in Seoul