[Source/Observer Network Qi Qian]

Officials from the Trump administration are still not giving up and are attempting to further tighten restrictions on chip exports to China. According to a June 20 report by The Wall Street Journal, sources familiar with the matter said that an American official threatened to revoke exemptions for several global semiconductor giants regarding their operations in China, targeting Chinese chip factories.

The report stated that Samsung Electronics, SK Hynix, TSMC, and other semiconductor manufacturers currently enjoy comprehensive exemptions, allowing them to transport American chip manufacturing equipment to their factories in China without applying for separate licenses each time.

However, according to sources familiar with the matter, earlier this week, Jeffrey Kassler, head of the U.S. Commerce Department's export control department, informed these three companies that he wanted to cancel these exemptions. Kassler claimed that this move is part of the Trump administration's efforts to prevent key American technologies from flowing to China.

A White House official argued that this action is not a new trade escalation, and frankly admitted that the U.S. wants to establish a chip equipment licensing system following China's rare earth export licensing system. They also mentioned that progress continues to be made between the two countries in completing trade negotiations and agreements.

"Chip manufacturers will still be able to operate in China," responded the spokesperson for the U.S. Commerce Department when requested for comment. "The new chip enforcement mechanism is consistent with the licensing requirements for other semiconductor companies exporting to China, ensuring that the U.S. has a fair and reciprocal process."

Materials photo of Samsung Electronics factory

This April, after President Trump imposed excessively high tariffs on China, China quickly retaliated by implementing export controls on a series of critical minerals and rare earth magnets. Industry insiders revealed that China is establishing an export licensing system. China has repeatedly stated that this measure complies with international practices and is not targeted at any specific country. Currently, China has legally approved a certain number of compliant rare earth export applications.

Reuters previously cited sources indicating that with the introduction of export control policies, China has introduced a tracking system for the rare earth magnet industry. Sources familiar with the matter disclosed that China's tracking system has taken effect—requiring producers to submit additional information online, including transaction volume and customer names.

The Wall Street Journal reported that the proposed revocation of exemptions has yet to be finalized. However, multiple participants in the discussions warned that if implemented, this move could further damage diplomatic and economic relations between the two countries and harm American businesses' interests.

China's Ministry of Commerce spokesperson previously announced that from June 9 to 10, the U.S.-China economic and trade teams held their first meeting of the U.S.-China economic and trade consultation mechanism in London. Both sides reached a principled agreement on measures to implement important consensuses from the leaders' phone call on June 5 and consolidate the results of the Geneva economic and trade talks, achieving new progress in addressing each other's trade concerns.

The report noted that the latest measures would make it more difficult for global chip manufacturers to operate in China, potentially leading the Chinese side to view this as a breach of the agreement between the two countries. This move has also strained relations between the U.S. and South Korea, as Samsung Electronics and SK Hynix have already announced significant investments in the U.S. There are reports that South Korean companies have informed relevant departments of their country about the exemption issue, hoping that the South Korean government will oppose this U.S. initiative.

Meanwhile, industry insiders pointed out that stricter restrictions imposed by the Trump administration will not immediately force Chinese factories to close, but over time, this will disrupt the global supply chain.

However, sources familiar with the matter revealed that Kassler's proposal has yet to receive support from other departments of the U.S. government, such as the Department of Defense. Kassler and other hawks hold a hardline stance on China, believing that tough measures are needed to restrict China's progress in key areas and stimulate the development of supply chains outside of China. These views have put them at odds with pro-business officials.

Opponents within the Trump administration worry that revoking the exemptions will ultimately benefit Chinese enterprises and allow China to take control of these factories. Additionally, it is expected that affected chip manufacturers may seek case-by-case licenses from the U.S. government to supply their Chinese factories while seeking to replace American equipment with Japanese and European alternatives, ultimately harming the interests of American businesses.

The report mentioned that in recent weeks, the U.S. government has suspended sales of more advanced chips by companies like NVIDIA and AMD to China. This move has caused losses of billions of dollars in revenue for these two American companies.

Video screenshot of Jensen Huang's warning on U.S. chip export restrictions in Paris on June 12

As early as October 2022, the U.S. government had already implemented a series of chip export restriction measures, which have been continuously tightened to prevent NVIDIA, AMD, Intel, and other American semiconductor giants from selling their most advanced chips in China, forcing these companies to find workarounds.

Since taking office, the Trump administration has consistently promised to continue cracking down on AI chip exports to China. On April 15, the U.S. halted exports of NVIDIA's H20 chip, AMD's MI308 chip, and similar AI chips to China under the pretext of "aligning with national and economic security interests." On May 9, there were reports that NVIDIA would downgrade its "special version" chips for China, which were expected to be released about two months later.

Reuters pointed out that this caused NVIDIA's sales to plummet, resulting in a loss of $2.5 billion in the first quarter and an estimated $8 billion loss in the second quarter.

NVIDIA CEO Jensen Huang has consistently opposed restrictions on exports to China. In March, when asked about export controls to China, Huang noted that approximately half of the world's AI researchers come from China, many of whom work in American laboratories.

Bill Dally, NVIDIA's chief scientist, pointed out that the U.S. ban on AI exports to China has given China significant room for development. Previously, Chinese AI researchers who wrote programs for NVIDIA are now helping Huawei write programs.

American business news outlet CNBC warned that the strategic impact of the new U.S. regulations halting NVIDIA's "special version" chips for China far outweighs the financial impact. NVIDIA dominates the AI system semiconductor market, and sales of chips to China are crucial for its future. NVIDIA believes that exiting the Chinese market would hand over its chip sales business to Huawei, an AI chip manufacturer, which would begin challenging its global sales share.

Patrick Moorhead, an analyst at technology consulting firm Moor Insights & Strategy, stated: "This cuts off NVIDIA's access to a key market, and they will lose momentum in China. Ultimately, Chinese enterprises will turn to Huawei."

On June 12, Huang Huang twice criticized U.S. chip export restrictions to China within one day. Huang stated that NVIDIA's sales to China have been severely impacted, and he warned that if the chip export restrictions continue, Huawei will "cover the Chinese market" and extend to other countries around the world.

This article is an exclusive contribution from the Observer Network and cannot be reprinted without permission.

Original source: https://www.toutiao.com/article/7518268220407661066/

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