The Biden administration published new export restrictions last week to hinder the Chinese Communist Party’s (CCP) ability to purchase and use U.S. technology for manufacturing high-end chips for military development, artificial intelligence, and supercomputers.

Under the new regulation, firms must obtain licenses from the U.S. Department of Commerce before supplying China-based chipmakers with cutting-edge U.S. manufacturing equipment.

A recent Nikkei Asia report pointed out that the export curbs this time also pose the greatest threat to China’s chip sector. It’s because the curbs are much more restricting than not having access to U.S. cutting-edge technology.

The outlet, citing sources, reported on October 11 that for the first time, new U.S. regulations do not allow “U.S. persons,” including both citizens and permanent residents, to assist in the “development” or “production” of specific advanced chips in China-based chipmaking facilities. 

As a result, all Chinese Americans with U.S. citizenship will be subject to the provisions.

The move hits right at the heart of Beijing’s chip ambition. Over the last decade, the CCP has spent billions of dollars investing in a recruitment program called the “Thousand Talents Plan,” which started in 2008. 

The CCP wants to encourage “sea turtles” (hagui), a Chinese nickname for returnees who have studied and worked abroad, to return home to teach at top universities, start businesses, and help improve the country’s industries.

However, the latest export controls will prohibit these “sea turtles” from helping develop China’s chip sector.

Mark Li, a semiconductor analyst at Sanford C. Bernstein, said, “It could have a big impact if U.S. talent can’t support Chinese chip development.”

Christopher Timura, a Washington-based lawyer at Gibson, Dunn & Crutcher, told the outlet, “This new restriction applies not only to engineers who might be supporting the development and production of the types of targeted ICs. But also to other business personnel because it also extends to U.S. persons that are involved in other business functions such as shipping or transmitting commodities or technologies.”

He added that the new regulations aim squarely at U.S.-based firms and American expats seeking to support projects and chipmaking plants in China.

All chip-related development activities of such Chinese American individuals must stop until they obtain a license.

Timura even compares the new curb with the restrictions on U.S. persons supporting sanctioned nations such as Cuba, Iran, and North Korea.

Therefore, several trade and export control lawyers said that violating the license requirement could be subject to civil and criminal penalties.

Donnie Teng, a tech analyst with Nomura Securities, told Nikkei Asia, “We don’t have actual numbers of how many people could fall under the U.S. new regulations this time. But from public information, many key Chinese chip companies are led by Chinese Americans or have several Chinese American senior executives. They are crucial industry leaders for Chinese semiconductor development and progress.”

The outlet, citing information from industry executives and public filings, reported that founding Chairman and CEO Gerald Yin of Advanced Micro-Fabrication Equipment Inc. China (AMEC), China’s leading equipment producer, is a U.S. citizen.

Yin worked in the U.S. for twenty years before founding AMEC in 2004. In addition, many senior executives of the firm, including chief operating officer Du Zhiyou, also have American citizenship and long years of working and studying in the U.S.

Another key figure is David H. Wang, CEO and president of ACM Research, China’s leading producer of wafer-cleaning machines.

Other examples include Chen Lu, the founding chairman and CEO of Skyverse Technology, a major supplier of test machines. And Wang Sumin, founding chair and CEO of chipmaking chemical producer Anji Microelectronics.

Shanghai-listed chip equipment producer Tuojing Technology, also known as Piotech, has at least four senior executives with American citizenship.

A human resources executive at a Chinese state-owned chip firm told Da Ji Yuan, “Our company does have (U.S. citizens) in some of the top positions. We must find a way to keep these people for our company. But it’s difficult as most of them don’t want to give up their U.S. passports.” 

An industry insider said, “The new regulation caught many of these Chinese American executives off guard. … Many of them have family overseas in the U.S. and have assets and properties in the U.S. It will be very tough for them if the U.S. can really enforce and execute this new regulation.”

In addition, Financial Times reported that most U.S. staff working in China-based chip firms are Chinese and Taiwanese. 

A Taiwanese intelligence official estimated that about 200 Taiwanese Americans with U.S. citizenship are currently working in China’s chip industry.

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