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    US Cracks Down on Chinese Companies for Security Concerns

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    The Biden administration placed severe restrictions on trade with dozens of Chinese entities, its latest step in a campaign to curtail access to technology with military applications.WASHINGTON — The Biden administration on Thursday stepped up its efforts to impede China’s development of advanced semiconductors, restricting another 36 companies and organizations from getting access to American technology.The action, announced by the Commerce Department, is the latest step in the administration’s campaign to clamp down on China’s access to technologies that could be used for military purposes and underscored how limiting the flow of technology to global rivals has become a prominent element of United States foreign policy.Administration officials say that China has increasingly blurred the lines between its military and civilian industries, prompting the United States to place restrictions on doing business with Chinese companies that may feed into Beijing’s military ambitions at a time of heightened geopolitical tensions, especially over Taiwan.In October, the administration announced sweeping limits on semiconductor exports to China, both from companies within the United States and in other countries that use American technology to make those products. It has also placed strict limits on technology exports to Russia in response to Moscow’s invasion of Ukraine.“Today we are building on the actions we took in October to protect U.S. national security by severely restricting the PRC’s ability to leverage artificial intelligence, advanced computing, and other powerful, commercially available technologies for military modernization and human rights abuses,” Alan Estevez, the under secretary of commerce for industry and security, said in a statement, referring to the People’s Republic of China.Among the most notable companies added to the list is Yangtze Memory Technologies Corporation, a company that was said to be in talks with Apple to potentially supply components for the iPhone 14.Congress has been preparing legislation that would prevent the U.S. government from purchasing or using semiconductors made by Y.M.T.C. and two other Chinese chip makers, Semiconductor Manufacturing International Corporation and ChangXin Memory Technologies, because of their reported links to Chinese state security and intelligence organizations.The Biden PresidencyHere’s where the president stands after the midterm elections.A New Primary Calendar: President Biden’s push to reorder the early presidential nominating states is likely to reward candidates who connect with the party’s most loyal voters.A Defining Issue: The shape of Russia’s war in Ukraine, and its effects on global markets, in the months and years to come could determine Mr. Biden’s political fate.Beating the Odds: Mr. Biden had the best midterms of any president in 20 years, but he still faces the sobering reality of a Republican-controlled House for the next two years.2024 Questions: Mr. Biden feels buoyant after the better-than-expected midterms, but as he turns 80, he confronts a decision on whether to run again that has some Democrats uncomfortable.The U.S. government added the companies to a so-called entity list that will severely restrict their access to certain products, software and technologies. The targeted companies are producers and sellers of technologies that could pose a significant security risk to the United States, like advanced chips that are used to power artificial intelligence and hypersonic weapons, and components for Iranian drones and ballistic missiles, the Commerce Department said.In an emailed statement, Liu Pengyu, the spokesman for the Chinese embassy in Washington, said that the United States “has been stretching the concept of national security, abusing export control measures, engaging in discriminatory and unfair treatment against enterprises of other countries, and politicizing and weaponizing economic and sci-tech issues. This is blatant economic coercion and bullying in the field of technology.”“China will resolutely safeguard the lawful rights and interests of Chinese companies and institutions,” he added.On Monday, China filed a formal challenge to the Biden administration’s chip controls at the World Trade Organization, criticizing the restrictions as a form of “trade protectionism.”The administration said that some companies, including Y.M.T.C. and its Japanese subsidiary, were added to the list because they posed a significant risk of transferring sensitive items to other companies sanctioned by the U.S. government, including Huawei Technologies and Hikvision.The Commerce Department said that another entity, Tianjin Tiandi Weiye Technologies, was added for its role in aiding China’s campaign of repression and surveillance of Uyghurs and other Muslim minority groups in the Xinjiang region of China, as well as providing U.S. products to Iran’s Islamic Revolutionary Guards Corps. U.S.-based firms will now be forbidden from shipping products to these companies without first obtaining a special license.Twenty-three of the entities — in particular, those supplying advanced chips used for artificial intelligence with close ties to the Chinese military and defense industry, and two Chinese companies that were found to be supporting the Russian military — were hit with even tougher restrictions.The companies will be subject to what is known as the foreign direct product rule, which will cut them off from buying products made anywhere in the world with the use of American technology or software, which would encompass most global technology companies.The administration also said it would lift restrictions on some companies that had successfully undergone U.S. government checks that ensured their products weren’t being used for purposes that the government deemed harmful to national security.As part of the restrictions unveiled in October, the Biden administration placed dozens of Chinese firms on a watch list that required them to work with the U.S. government to verify that their products were not being used for activities that would pose a security risk to the United States.A total of 25 entities completed those checks, in cooperation with the Chinese government, and thus have been removed from the list. Nine Russian parties that were unable to clear those checks were added to the entity list, the department said.A spokesperson for the Commerce Department said that the actions demonstrated that the United States would defend its national security but also stood ready to work in cooperation with companies and host governments to ensure compliance with U.S. export controls.In a separate announcement Thursday morning, a government board that oversees the audits of companies listed on stock exchanges to protect the interests of investors said that it had gained complete access for the first time in its history to inspect accounting firms headquartered in mainland China and Hong Kong.The agency, called the Public Company Accounting Oversight Board, said this was just an initial step in ensuring that Chinese companies are safe for U.S. investors. But the development marked a step toward a potential resolution of a yearslong standoff between the United States and China over financial checks into public companies. It also appeared to decrease the likelihood that major Chinese companies will be automatically delisted from U.S. exchanges in the years to come.Congress passed a law in 2020 that would have required Chinese companies to delist from U.S. stock exchanges if U.S. regulators were not able to inspect their audit reports for three consecutive years.Erica Y. Williams, the chair of the board, said the announcement should not be misconstrued as a “clean bill of health” for firms in China. Her staff had identified numerous potential deficiencies with the firms they inspected, she said, though that was not an unexpected outcome in a jurisdiction being examined for the first time.“I want to be clear: this is the beginning of our work to inspect and investigate firms in China, not the end,” Ms. Williams said. More

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    ‘Innovation Hubs’ Aim to Lift Distressed Areas. Congress Just Has to Fund Them.

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    A new report suggests where 20 newly created research centers could best revitalize struggling economies and accelerate new technologiesWASHINGTON — Included in the bipartisan industrial policy legislation that President Biden signed into law this summer was a $10 billion effort to jump-start economically sputtering regions across the country: a series of “innovation hubs” across 20 metropolitan areas.Supporters of targeted federal efforts to revitalize struggling areas are eager for the Commerce Department to start picking the sites for those hubs. Researchers from a Washington think tank, the Economic Innovation Group, are set to release a comprehensive report on Monday that draws on a wide array of economic data to calculate where the hubs could best achieve their dual goals. Those include helping areas in need of an economic jolt and accelerating technological advancements that lift the U.S. economy as it competes on a global stage, and the list of potential sites is heavy on cities in the Mountain West, the Carolinas and Ohio.“The stakes here are really high,” said Kenan Fikri, director of research at the Economic Innovation Group. “They’re high in the competition between the United States and China, and they’re high for the future of place-based policies.”But before the Commerce Department can start the process of deciding where to put the hubs, Congress must actually fund their creation. The need for Congress to greenlight actual money extends to many of the key provisions in the new law, the CHIPS and Science Act, which authorized lawmakers to fund a variety of new programs without actually laying out the money for them.As Mr. Biden prepares to fly to Arizona on Tuesday to celebrate investments in semiconductor manufacturing catalyzed by the CHIPS Act, the immediate fate of the innovation hubs is in flux. Lawmakers are debating whether they will be able to pass a comprehensive spending bill before the end of the year, or just a stopgap one, which would be less likely to include money for the hubs.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Gina Raimondo, a Rising Star in the Biden Administration, Faces a $100 Billion Test

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    WEST LAFAYETTE, Ind. — Gina Raimondo, the commerce secretary, was meeting with students at Purdue University in September when she spotted a familiar face. Ms. Raimondo beamed as she greeted the chief executive of SkyWater Technology, a chip company that had announced plans to build a $1.8 billion manufacturing facility next to the Purdue campus.“We’re super excited about the Indiana announcement,” she said. “Call me if you need anything.”These days, Ms. Raimondo, a former Rhode Island governor, is the most important phone call in Washington that many chief executives can make. As the United States embarks on its biggest foray into industrial policy since World War II, Ms. Raimondo has the responsibility of doling out a stunning amount of money to states, research institutions and companies like SkyWater.She is also at the epicenter of a growing Cold War with China as the Biden administration uses her agency’s expansive powers to try to make America’s semiconductor industry more competitive. At the same time, the administration is choking off Beijing’s access to advanced chips and other technology critical to China’s military and economic ambitions.China has responded angrily, with its leader, Xi Jinping, criticizing what he called “politicizing and weaponizing economic and trade ties” during a meeting with President Biden this month, according to the official Chinese summary of his comments.The Commerce Department, under Ms. Raimondo’s leadership, is now poised to begin distributing nearly $100 billion — roughly 10 times the department’s annual budget — to build up the U.S. chip industry and expand broadband access throughout the country.How Ms. Raimondo handles that task will have big implications for the United States economy going forward. Many view the effort as the best — and only — bet for the United States to position itself in industries of the future, like artificial intelligence and supercomputing, and ensure that the country has a secure supply of the chips necessary for national security.But the risks are similarly huge. Critics of the Biden administration’s plans have noted that the federal government may not be the best judge of which technologies to back. They have warned that if the administration gets it wrong, the United States may surrender its leadership in key technologies for good.“The essence of industrial policy is you’re gambling,” said William Reinsch, a trade expert at the Center for Strategic and International Studies, a think tank. “She’s going to be in a tough spot because there probably will be failures or disappointments along the way,” he said.The outcome could also have ramifications for Ms. Raimondo’s political ambitions. In less than two years in Washington, Ms. Raimondo, 51, has emerged as one of President Biden’s most trusted cabinet officials. Company executives describe her as a skillful and charismatic politician who is both engaged and accessible in an administration often known for its skepticism of big business.Ms. Raimondo’s work has earned her praise from Republicans and Democrats, along with labor unions and corporations. Her supporters say she could ascend to another cabinet position, run for the Senate or perhaps mount a presidential bid.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Chip Makers, Once in High Demand, Confront Sudden Challenges

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    Demand for semiconductors was off the charts last year. But a sharp slowdown coupled with new U.S. restrictions against China have created obstacles.A few months ago, makers of computer chips seemed on top of the world.Customers could not get enough of the small slices of silicon, which act as the brains of computers and are needed in just about every device with an on-off switch. Demand was so strong — and U.S. dependence on a foreign manufacturer so worrying — that Democrats and Republicans agreed in July on a $52 billion subsidy package that included grants to build new chip factories in America.U.S. chip makers such as Intel, Micron Technology, Texas Instruments and GlobalFoundries pledged huge expansions in domestic manufacturing, betting on a growing need for their products and the prospects of federal subsidies.But lately, supplies of some semiconductors are piling up, which could spell good news for consumers but not for industry executives. Their bold investment plans are running into a sudden and unexpected slowdown in consumer demand for electronic gadgets, new U.S. restrictions on sales to customers in China, rising inflation and the unusual prospect of a simultaneous shortage of some chips and glut of others.That has left chip makers, which had been looking ahead to immense demand and opportunity, suddenly grappling with immense challenges. Many of the companies now face complex questions about whether and when to boost production, amid uncertainty about how long the current sales slowdown may last.“Six months ago, I would have said we were in this hypergrowth phase,” Rene Haas, chief executive of Arm, the British company whose chip technology powers billions of smartphones, said of the broader industry. Now, he said, “we’re in a pause.”For many consumers, products that were scarce because of a chips shortage may start becoming more available, though not immediately. Automakers, which have struggled to make enough cars with the lack of chips and other components, said they were getting more but still face some problems. Prices of smartphones and computers could also fall as chip supplies grow and prices plummet for two types of memory chips they use.But for now, not everyone is able to get all the chips they need, and prices remain high for many kinds of semiconductors. “We are still way above prepandemic pricing,” said Frank Cavallaro, chief executive of A2 Global Electronics and Solutions, a chip distributor.Fears of a slump, which have clobbered semiconductor stocks this year, are evident in recent earnings announcements from chip makers. South Korea’s SK Hynix on Wednesday reported a 20 percent drop in revenue and said its business of memory chips “is facing an unprecedented deterioration in market conditions.” Intel provided more evidence of a downturn in its third-quarter results on Thursday, including a 20 percent drop in revenue and a $664 million charge to cover cost-cutting measures expected to include job cuts.The Biden administration delivered its own blow this month with sweeping restrictions aimed at hobbling China from using U.S. technology related to chips. The measures restrict sales of some advanced chips to Chinese customers and prevent U.S. companies from helping China develop some kinds of chips.That hurts semiconductor companies like Nvidia, which makes graphics chips used to run A.I. applications in China and elsewhere. The Silicon Valley company, already suffering from a sharp sales decline for video game applications, recently estimated that the U.S. restrictions would probably reduce revenues in its current quarter by about $400 million.The sanctions may bite even harder at companies that sell chip-making equipment, which relied heavily in recent years on sales to Chinese factories.Lam Research, which produces tools that etch silicon wafers to make chips, estimated that the China limitations would reduce its 2023 revenue by $2 billion to $2.5 billion. “We lost some very profitable customers in the China region, and that’s going to persist,” Doug Bettinger, Lam’s chief financial officer, said during an earnings call last week.Applied Materials, the biggest maker of chip manufacturing tools, also said sales would suffer because of the restrictions. On Wednesday, another maker of chip manufacturing tools, KLA, said its revenue next year was likely to shrink by $600 million to $900 million as it reduces equipment sales and services to some customers in China.Worries about foreign competition are nothing new in semiconductors, an industry known for boom-and-bust cycles. But it has rarely faced a player as potent as the Taiwan Semiconductor Manufacturing Company, whose factories on the island churn out chips designed by companies including Apple, Amazon, Nvidia and Qualcomm.China claims Taiwan as its own territory, creating a potential risk to chip supplies. That helped drive the recent bipartisan support for the U.S. chip legislation, which was heavily pushed by President Biden.President Biden trekked to Albany, Ohio, last month for the ground breaking of a $20 billion Intel manufacturing campus. Pete Marovich for The New York TimesHe trekked to Ohio last month for the ground breaking of a $20 billion Intel manufacturing campus. On Thursday, President Biden visited a site near Syracuse, N.Y., where Micron has vowed to spend as much as $100 billion over 20 years on a large complex to build memory chips, a project he called “one of the most significant investments in American history.”Those plants will be needed at some point, industry executives said. But they are now grappling with the sudden and sharp decline in chip demand. The problem is particularly acute in processors and memory chips, which perform calculations and store data in personal computers, tablets, smartphones and other devices.Those products were hot commodities as consumers worked from home during the coronavirus pandemic. But that boom has now cooled, with PC sales dropping 15 percent in the third quarter, according to estimates by International Data Corporation. The research firm also predicted that smartphone sales would fall 6.5 percent this year. Demand has been tempered by inflation as well as a lengthy Covid lockdown in China, analysts said.At the same time, inventories of chips piled up. Computer makers spooked by the shortage bought more components than they ended up needing, said Dan Hutcheson, a market researcher at the firm TechInsights. When customer demand dried up, they started slashing orders.“You see multiple issues converging,” said Syed Alam, who leads Accenture’s global high tech consulting practice, including semiconductors.Handel Jones, chief executive at International Business Strategies, predicts that total sales for the chip industry will still grow 9.5 percent this year. But he expects revenue to decline 3.4 percent to $584.5 billion next year. Last year, he had predicted steady yearly growth for the chip industry from 2022 until 2030.Warning signs included Intel’s second-quarter results, which it announced in July. The company posted a rare loss and a 22 percent drop in revenue, blaming its own missteps and customers who cut chip inventories.At Micron, the mood also changed quickly. In May, the company gave bullish presentations at an investor event in San Francisco about long-term demand for its memory chips. By the next month, it was warning of slowing demand and falling chip prices.In September, the company reported a 20 percent drop in fourth-quarter revenue. It also slashed planned spending on factories and equipment by nearly 50 percent in the current fiscal year.The swing in demand might seem to undercut Micron’s widely publicized expansion plans, which include the Syracuse complex and a new $15 billion factory in Boise. But chip manufacturers often juggle different time schedules. Since new factories take roughly three years to complete, waiting too long to build can leave them short-handed when sales rebound.“The long-term outlook for memory and storage is robust,” said Mark Murphy, Micron’s executive vice president and chief financial officer. The cuts in near-term capital spending, he added, are a needed response “to bring our supply in line with demand.”Intel’s situation is even more complex. The company has major factory expansions underway in Arizona, Oregon, New Mexico, Ireland and Israel, in addition to the new manufacturing campus in Ohio and one planned for Germany. Intel is also determined to start competing with T.S.M.C. in manufacturing for other companies, as well as making chips it designs.The Taiwan Semiconductor Manufacturing Company is a potent player in semiconductors, with factories that churn out chips designed by companies including Apple, Amazon and Qualcomm.An Rong Xu for The New York TimesIntel now plans to construct factory buildings while holding off on purchases of the costly machines inside them, which are a much bigger expense.Those purchases can be tailored to emerging demand for particular kinds of chips, said Keyvan Esfarjani, Intel’s executive vice president who oversees construction and operation of its factories. He said the long-term need to reduce U.S. and European dependence on chips made in Asia was too important to be halted by short-term business cycles.“This is beyond Intel,” Mr. Esfarjani said in an interview last month. “This is important for people, for communities, for the United States. It’s important for national security.” More

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    With New Crackdown, Biden Wages Global Campaign on Chinese Technology

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    U.S. officials pushed to choke off China’s access to critical semiconductor technology after internal debates and tough negotiations with allies.WASHINGTON — In conversations with American executives this spring, top officials in the Biden administration revealed an aggressive plan to counter the Chinese military’s rapid technological advances.China was using supercomputing and artificial intelligence to develop stealth and hypersonic weapons systems, and to try to crack the U.S. government’s most encrypted messaging, according to intelligence reports. For months, administration officials debated what they could do to hobble the country’s progress.They saw a path: The Biden administration would use U.S. influence over global technology and supply chains to try to choke off China’s access to advanced chips and chip production tools needed to power those abilities. The goal was to keep Chinese entities that contributed to potential threats far behind their competitors in the United States and in allied nations.The effort, no less than what the Americans carried out against Soviet industries during the Cold War, gained momentum this year as the United States tested powerful economic tools against Russia as punishment for its invasion of Ukraine, and as China broke barriers in technological development. The Russian offensive and Beijing’s military actions also made the possibility of a Chinese invasion of Taiwan seem more real to U.S. officials.The administration’s concerns about China’s tech ambitions culminated last week in the unveiling of the most stringent controls by the U.S. government on technology exports to the country in decades — an opening salvo that would ripple through global commerce and could frustrate other governments and companies outside China.In a speech on Wednesday on the administration’s national security strategy, Jake Sullivan, the national security adviser, talked about a “small yard, high fence” for critical technologies.“Choke points for foundational technologies have to be inside that yard, and the fence has to be high because these competitors should not be able to exploit American and allied technologies to undermine American and allied security,” he said.This account of how President Biden and his aides decided to wage a new global campaign against China, which contains previously unreported details, is based on interviews with two dozen current and former officials and industry executives. Most spoke on the condition of anonymity to discuss deliberations.The measures were particularly notable given the Biden administration’s preference for announcing policies in tandem with allies to counter rival powers, as it did with sanctions against Russia.With China, the administration spent months in discussions with allies, including the Dutch, Japanese, South Korean, Israeli and British governments, and tried to persuade some of them to issue restrictions alongside the United States.But some of those governments have been hesitant to cut off important commerce with China, one of the world’s largest technology markets. So the Biden administration decided to act alone, without public measures from allies.More on the Relations Between Asia and the U.S.Taiwan: American officials are intensifying efforts to build a giant stockpile of weapons in Taiwan in case China blockades the island as a prelude to an attempted invasion, according to current and former officials.North Korea: Pyongyang fired an intermediate range ballistic missile over Japan for the first time since 2017, when Kim Jong-un seemed intent on escalating conflict with Washington. But the international landscape has changed considerably since then.A Broad Partnership: The United States and 14 Pacific Island nations signed an agreement at a summit in Washington, putting climate change, economic growth and stronger security ties at the center of an American push to counter Chinese influence.South Korea: President Yoon Suk Yeol has aligned his country more closely with the United States, but there are limits to how far he can go without angering China or provoking North Korea.Gregory C. Allen, a former Defense Department official who is now at the Center for Strategic and International Studies, said the move came after consultation with allies but was “fundamentally unilateral.”“In weaponizing its dominant choke-point positions in the global semiconductor value chain, the United States is exercising technological and geopolitical power on an incredible scale,” he wrote in an analysis.The package of restrictions allows the administration to cut off China from certain advanced chips made by American and foreign companies that use U.S. technology.President Biden visited an IBM factory in Poughkeepsie, N.Y., last week.Erin Schaff/The New York TimesU.S. officials described the decision to push ahead with export controls as a show of leadership. They said some allies wanted to impose similar measures but feared retaliation from China, so the rules from Washington that encompass foreign companies did the hard work for them.Other rules bar American companies from selling Chinese firms equipment or components needed to manufacture advanced chips, and prohibit Americans and U.S. companies from giving software updates and other services to China’s cutting-edge chip factories.The measures do not directly restrict foreign makers of semiconductor equipment from selling products to China. But experts said the absence of the American equipment would most likely impede China’s nascent industry for making advanced chips. Eventually, though, that leverage could fade as China develops its own key production technologies.Some companies have chafed at the idea of losing sales in a lucrative market. In a call with investors in August, an executive at Tokyo Electron in Japan said the company was “very concerned” that restrictions could prevent its Chinese customers from producing chips. ASML, the Dutch equipment maker, has expressed criticisms.Chinese officials called the U.S. restrictions a significant step aimed at sabotaging their country’s development. The move could have broad implications — for example, limiting advances in artificial intelligence that propel autonomous driving, video recommendation algorithms and gene sequencing, as well as quashing China’s chip-making industry. China could respond by punishing foreign companies with operations there. And the way Washington is imposing the rules could strain U.S. alliances, some experts say.Top officials in the Biden administration have an aggressive plan to counter the Chinese military’s rapid technological advances.Kevin Frayer/Getty Images“Sanctions that put the United States at odds with its allies and partners today will both undercut their effectiveness and make it harder to enroll a broad coalition of states in U.S. deterrence efforts,” said Jessica Chen Weiss, a professor of government at Cornell University and a recent State Department official.Others have argued that the moves did not come soon enough. For years, U.S. intelligence reports warned that American technology was feeding China’s efforts to develop advanced weapons and surveillance networks that police its citizens.Last October, the intelligence community began highlighting the risks posed by Chinese advances in artificial intelligence, quantum computing and semiconductors in meetings with industry and government officials..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}What we consider before using anonymous sources. Do the sources know the information? What’s their motivation for telling us? Have they proved reliable in the past? Can we corroborate the information? Even with these questions satisfied, The Times uses anonymous sources as a last resort. The reporter and at least one editor know the identity of the source.Learn more about our process.Mr. Sullivan and other officials began pushing to curb sales of semiconductor technology, according to current and former officials and others familiar with the discussions.But some officials, including Commerce Secretary Gina Raimondo and her deputies, wanted to first secure the cooperation of allies. Starting late last year, they said in meetings that by acting alone, the United States risked harming its companies without doing much to stop Chinese firms from buying important technology from foreign competitors.The Trump administration announced restrictions on the Chinese tech giant Huawei and singled out the company as a threat to national security.Qilai Shen for The New York TimesA Diplomatic PushEven as the Trump administration took some aggressive actions against Chinese technology, like barring international shipments to Huawei, it began quiet diplomacy on semiconductor production equipment. U.S. officials talked with their counterparts in Japan and then the Netherlands — countries where companies make critical tools — on limiting exports to China, said Matthew Pottinger, a deputy national security adviser in the Trump administration.Biden administration officials have continued those talks, but some negotiations have been difficult. U.S. officials spent months trying to persuade the Netherlands to prevent ASML from selling older lithography machines to Chinese semiconductor companies, but they were rebuffed.U.S. officials carried out separate negotiations with South Korea, Taiwan, Israel and Britain on restricting the sale and design of chips.Outside of the diplomacy, there was increasing evidence that a tool the United States had used to restrict China’s access to technology had serious flaws. Under President Donald J. Trump, the United States added hundreds of companies to a so-called entity list that prohibited American companies from selling them sensitive products without a license.But each listing was tied to a specific company name and address, making it relatively easy to evade the restrictions, said Ivan Kanapathy, a former China director for the National Security Council.Current and former U.S. officials suspect the Chinese military and previously sanctioned Chinese companies, including Huawei, have tried to gain access to restricted technology through front companies. Huawei declined to comment.Huawei could soon face additional restrictions: The Federal Communications Commission is expected to vote in the coming weeks on rules that would block the authorization of new Huawei equipment in the United States over national security concerns.Biden officials also believed the restrictions issued by the Trump administration against Semiconductor Manufacturing International Corporation, a major Chinese chip maker known as SMIC, had been watered down by industry and were allowing too many sales to continue, people familiar with the matter said.In a call with heads of American semiconductor equipment makers in March, Mr. Sullivan said that the United States was no longer satisfied with the status quo with China, and that it was seeking to freeze Chinese technology, said one executive familiar with the discussion.Mr. Sullivan, who had dialed into the call alongside Ms. Raimondo and Brian Deese, the director of the National Economic Council, told executives from KLA, Applied Materials and Lam Research that rules restricting equipment shipments to China would be done with allies, the executive said.In a statement, the National Security Council said the measures were “consistent with the message we delivered to U.S. executives because the administration has controlled only tools made by U.S. companies where there is no foreign competitor.”A semiconductor plant in Suining, China. The Biden administration took action in August to clamp down on the country’s semiconductor industry.Zhong Min/Feature China/Future Publishing, via Getty ImagesBreakthrough in ChinaAs negotiations with allied governments continued, experts at the Commerce, Defense, Energy and State Departments spent months poring over spreadsheets listing dozens of semiconductor tools made by U.S. companies to determine which could be used for advanced chip production and whether companies in Japan and the Netherlands produced comparable equipment.Then in July came alarming news. A report emerged that SMIC had cleared a major technological hurdle, producing a semiconductor that rivaled some complex chips made in Taiwan.The achievement prompted an explosion of dissatisfaction in the White House and on Capitol Hill with U.S. efforts to restrain China’s technological advancement.The Biden administration took action in August to clamp down on China’s semiconductor industry, sending letters to equipment manufacturers and chip makers barring them from selling certain products to China.Last week, the administration issued the ‌rules with global reach.Companies immediately began halting shipments to China. But U.S. officials said they would issue licenses on a case-by-case basis so some non-Chinese companies could continue supplying their Chinese facilities with support and components. Intel, TSMC, Samsung and SK Hynix said they had received temporary exemptions to the rules.The controls could be the beginning of a broad assault by the U.S. government, Mr. Pottinger said.“The Biden administration understands now that it isn’t enough for America to run faster — we also need to actively hamper the P.R.C.’s ambitions for tech dominance,” he said, referring to the People’s Republic of China. “This marks a serious evolution in the administration’s thinking.”Julian Barnes More

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    Biden Administration Clamps Down on China’s Access to Chip Technology

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    The White House issued sweeping restrictions on selling semiconductors and chip-making equipment to China, an attempt to curb the country’s access to critical technologies.WASHINGTON — The Biden administration on Friday announced sweeping new limits on the sale of semiconductor technology to China, a step aimed at crippling Beijing’s access to critical technologies that are needed for everything from supercomputing to guiding weapons.The moves are the clearest sign yet that a dangerous standoff between the world’s two major superpowers is increasingly playing out in the technological sphere, with the United States trying to establish a stranglehold on advanced computing and semiconductor technology that is essential to China’s military and economic ambitions.The package of restrictions, which was released by the Commerce Department, is designed in large part to slow the progress of Chinese military programs, which use supercomputing to model nuclear blasts, guide hypersonic weapons and establish advanced networks for surveilling dissidents and minorities, among other activities.Alan Estevez, the under secretary of commerce for industry and security, said his bureau was working to prevent China’s military, intelligence and security services from acquiring sensitive technologies with military applications.“The threat environment is always changing, and we are updating our policies today to make sure we’re addressing the challenges posed by the P.R.C. while we continue our outreach and coordination with allies and partners,” he said, referring to the People’s Republic of China.Technology experts said the rules appeared to impose the broadest export controls issued in a decade. While similar to the Trump administration’s crackdown on the telecom giant Huawei, the new rules are far wider in scope, affecting dozens of Chinese firms. And unlike the Trump administration’s approach — which was viewed as aggressive but scattershot — the rules appear to establish a more comprehensive policy that will stop cutting-edge exports to a range of Chinese technology companies and cut off China’s nascent ability to produce advanced chips itself.“It is an aggressive approach by the U.S. government to start to really impair the capability of China to indigenously develop certain of these critical technologies,” said Emily Kilcrease, a senior fellow at Center for a New American Security, a think tank.Companies will no longer be allowed to supply advanced computing chips, chip-making equipment and other products to China unless they receive a special license. Most of those licenses will be denied, though certain shipments to facilities operated by U.S. companies or allied countries will be evaluated case by case, a senior administration official said in a briefing Thursday.It remains to be seen whether the Chinese government will take action in response. Samm Sacks, a senior fellow at Yale Law School who studies technology policy in China, said the new rules could push Beijing to impose restrictions on American companies or firms from other countries that comply with U.S. rules but still want to maintain operations in China.“The question is: Would this new package cross a red line to trigger a response that we haven’t seen before?” she said. “A lot of people are anticipating it will. I think we’ll have to wait and see.”More on the Relations Between Asia and the U.S.Taiwan: American officials are intensifying efforts to build a giant stockpile of weapons in Taiwan in case China blockades the island as a prelude to an attempted invasion, according to current and former officials.North Korea: Pyongyang fired an intermediate range ballistic missile over Japan for the first time since 2017, when Kim Jong-un seemed intent on escalating conflict with Washington. But the international landscape has changed considerably since then.A Broad Partnership: The United States and 14 Pacific Island nations signed an agreement at a summit in Washington, putting climate change, economic growth and stronger security ties at the center of an American push to counter Chinese influence.South Korea: President Yoon Suk Yeol has aligned his country more closely with the United States, but there are limits to how far he can go without angering China or provoking North Korea.The measures come at a particularly sensitive moment for Beijing. Chinese leaders will hold a major political meeting beginning Oct. 16, where leader Xi Jinping is expected to secure a third leadership term, becoming the country’s longest-ruling leader since Mao Zedong.Liu Pengyu, a spokesman for the Chinese Embassy in Washington, said the United States was trying “to use its technological prowess as an advantage to hobble and suppress the development of emerging markets and developing countries.”“The U.S. probably hopes that China and the rest of the developing world will forever stay at the lower end of the industrial chain,” he added.The Chinese government has invested heavily in building up its semiconductor industry, but it still lags behind the United States, Taiwan and South Korea in its ability to produce the most advanced chips. In other fields, like artificial intelligence, China is no longer significantly behind the United States, but those technologies mostly rely on advanced chips that are designed or fabricated by non-Chinese firms.Jack Dongarra, a computer scientist at the University of Tennessee, said some of China’s most advanced supercomputers depended on chips made by California-based Intel or Taiwan Semiconductor Manufacturing Company, which uses U.S. technology in its production process and so would be subject to the new rules.The restrictions limit U.S. exports of high-tech chips called graphic processing units, which are used to power artificial intelligence applications, and place broad limits on chips destined for supercomputers in China. The rules also bar U.S.-based companies that make the equipment used to manufacture advanced logic and memory chips from selling that machinery to China without a license.Perhaps most significant, the Biden administration also imposed broad international restrictions that will prohibit companies anywhere in the world from selling chips used in artificial intelligence and supercomputing in China if they are made with U.S. technology, software or machinery. The restrictions used what is known as the foreign direct product rule, which was last deployed by former President Donald J. Trump to cripple Huawei.Another foreign direct product rule bans a broader range of products made outside the United States with American technology from being sent to 28 Chinese companies that have been placed on an “entity list” over national security concerns.Those companies include Beijing Sensetime Technology Development, a unit of a major Chinese artificial intelligence company, SenseTime. Also included are Dahua Technology, Higon, iFLYTEK, Megvii Technology, Sugon, Tianjian Phytium Information Technology, Sunway Microelectronics and Yitu Technologies, as well as a variety of labs and research institutions linked to universities and the Chinese government.In a briefing with reporters, senior administration officials said the measures would be limited to the most advanced chips and not have a broad commercial impact on private Chinese businesses. But they conceded that the limits could become more restrictive over time, given that technology will begin to outpace the advanced technological standards spelled out in the rules.Industry executives say many Chinese industries that rely on artificial intelligence and advanced algorithms power those abilities with American graphic processing units, which will now be restricted. Those include companies working with technologies like autonomous driving and gene sequencing, as well as the artificial intelligence company SenseTime and ByteDance, the Chinese internet company that owns TikTok.New limits on sales of chip-making equipment are also expected to clamp down on the operations of China’s homegrown chip makers, including Semiconductor Manufacturing International, Yangtze Memory Technologies and ChangXin Memory Technologies.The actual impact of the restrictions will hinge on how the policy is carried out. For most of the measures, the Commerce Department has the discretion to grant companies special licenses to continue selling the restricted products to China, though it said most would be denied.Some Republican lawmakers and China hawks have criticized the department for being too willing to issue such licenses, allowing U.S. companies to continue selling sensitive technology to China even when national security may be at stake.“If you want to stop it, you can just stop it,” said Derek Scissors, a senior fellow at the American Enterprise Institute. “When you create a licensing requirement, you are announcing to the world: We don’t want to stop it. We are just pretending.”With its vast ecosystem of factories, China continues to be a huge and lucrative market for U.S. chip exports. The tiny technologies are crucial to the smartphones, laptops, coffee makers, cars and other goods that Chinese factories pump out for domestic consumption and export to the world.Many American companies have long argued that their sales to China are an important source of revenue that allows them to reinvest in research and development and retain a competitive edge.But doing business with China has become much more fraught in the last few years, as the tensions between the United States and China have morphed into a cold war competition. The Chinese government has sought to blur the line between its defense sector and private industry, drawing on Chinese firms that specialize in fields including artificial intelligence, big data, aerospace technologies and quantum computing to fuel the country’s military modernization.Chinese military drills aimed at intimidating Taiwan, and China’s alignment with Moscow after the Russian invasion of Ukraine, have strengthened the case for technology regulation.Still, industry executives and some analysts argue that cutting China off from foreign chips will accelerate Beijing’s push to develop them itself and cause U.S. companies to lose out to foreign competitors, unless other countries also impose similar restrictions.The Semiconductor Industry Association said Friday that it was assessing the impact of the export controls on the industry and working with companies to ensure compliance.“We understand the goal of ensuring national security and urge the U.S. government to implement the rules in a targeted way — and in collaboration with international partners — to help level the playing field and mitigate unintended harm to U.S. innovation,” it said in a statement.In remarks last month, the Biden administration signaled that it would get tougher on technology regulation. Jake Sullivan, the national security adviser, said the U.S. government’s previous approach, of trying to stay a few generations ahead of competitors, was no longer sufficient.“Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible,” he said.Kevin Wolf, a partner at Akin Gump who led export control efforts during the Obama administration, said the move was “a fundamental shift in the use of export controls” to address broader national security objectives. Since the Cold War, most countries had used export controls more narrowly, focusing on regulating specific items that were necessary to produce or deploy weapons.Mr. Wolf said the new measures were likely to be highly effective in the short and medium term. “How effective they will be over the long term will be a function of whether allies ultimately agree to impose similar controls,” he added.Edward Wong More

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    Biden Visits IBM to Promote Investments in U.S. Semiconductor Production

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    President Biden traveled to Poughkeepsie, N.Y., to connect a $20 billion investment by IBM to the bipartisan bill meant to spur production of critical microchips.During his visit to IBM’s Hudson Valley facility in New York, President Biden highlighted the CHIPS and Science Act that provides subsidies to companies that sign up to jump-start domestic production of semiconductor chips.Erin Schaff/The New York TimesPresident Biden visited the Hudson Valley of New York on Thursday to tour an IBM facility after the company announced it would invest $20 billion across the region to increase its production of semiconductors and develop advanced technologies, including artificial intelligence and quantum computing.Mr. Biden has ramped up his travel schedule to promote the bipartisan legislative achievements that his administration has guided as the November midterm elections approach. At the company’s campus in Poughkeepsie, N.Y., he highlighted an industrial bill he signed in August that provides subsidies to companies that sign up to jump-start domestic production of semiconductor chips.The White House has held up the law as a way to keep up with China and other countries — including South Korea, Japan, India and Germany — that offer subsidies for the production of semiconductors, which are critical components in everything from smartphones to military technology.“More is going to change in the next 10 years than it has in the last 40,” Mr. Biden said. “Where in God’s name is it written that we can’t be the manufacturing hub of the world? There’s a lot of reasons to be optimistic.”The legislation, called the CHIPS and Science Act, contains $52 billion in subsidies and tax credits for companies that manufacture chips in the United States, with more than half of the amount dedicated to helping companies build facilities for making, assembling and packaging some of the world’s more advanced chips.In a news release before Mr. Biden’s visit, IBM hailed the bill for its effort to “secure supply of next-generation chips for today’s computers and artificial intelligence platforms as well as fuel the future of quantum computing by accelerating research, expanding the quantum supply chain, and providing more opportunities for researchers to explore business and science applications of quantum systems.”IBM’s announcement came two days after Micron Technology, the Idaho-based computing company, announced that it planned to spend as much as $100 billion over the next two decades or more to build a computer chip factory complex in upstate New York.“There is no doubt that without the CHIPS Act, we would not be here today,” Sanjay Mehrotra, the chief executive of Micron, said on Tuesday.During his remarks, Mr. Biden emphasized that the law would bolster American competitiveness in research and technology at a time when other countries have pulled ahead.“We’re going to make sure that any company that uses federal research and development funding to invest in new technologies has to make the product in America,” Mr. Biden said to applause, adding later: “It matters. This is about economic security, folks. It’s about national security. It’s about good-paying jobs you can raise a family on.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Administration officials hope that the bill’s bipartisan support, coupled with a windfall of pledged investment from large technology companies, is the sort of accomplishment that could appeal to voters ahead of the midterms. Seventeen Republicans voted for the bill in the Senate, while 24 Republicans supported it in the House.At one point, Mr. Biden, citing news reports, accused the Chinese government of lobbying in Congress against the law. “The Chinese Communist Party actively lobbied against the CHIPS and Science Act that I’d been pushing in the United States Congress,” Mr. Biden said. “Unfortunately, some of our friends on the other team bought it.”Representative Sean Patrick Maloney of New York, the chairman of House Democrats’ campaign arm, accompanied the president on his trip, as did Paul Tonko, and Pat Ryan, two Democratic congressmen from New York. Gov. Kathy Hochul, a Democrat, greeted Mr. Biden when he arrived in New York.Mr. Biden’s visit was also meant to bolster the fortunes of two Democrats facing tight races in next month’s elections. Mr. Maloney is facing a challenge from Assemblyman Michael Lawler in his district, which includes the Hudson Valley.Mr. Ryan, who won a special House election in August, is in a tight race against Assemblyman Colin Schmitt of New Windsor for the swing-district seat. The special election was seen as a potential test of the impact that June’s Supreme Court decision that ended the constitutional right to abortion might have on the midterm elections.After leaving Poughkeepsie, Mr. Biden traveled to Red Bank, N.J., to participate in a reception for the Democratic National Committee. On Thursday evening, he attended another reception for the Democratic Senatorial Campaign Committee. More

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    Biden Administration Releases Plan for $50 Billion Investment in Chips

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    The Commerce Department issued guidelines for companies angling to receive federal funding aimed at bolstering the domestic semiconductor industry.WASHINGTON — The Department of Commerce on Tuesday unveiled its plan for dispensing $50 billion aimed at building up the domestic semiconductor industry and countering China, in what is expected to be the biggest U.S. government effort in decades to shape a strategic industry.About $28 billion of the so-called CHIPS for America Fund is expected to go toward grants and loans to help build facilities for making, assembling and packaging some of the world’s more advanced chips.Another $10 billion will be devoted to expanding manufacturing for older generations of technology used in cars and communications technology, as well as specialty technologies and other industry suppliers, while $11 billion will go toward research and development initiatives related to the industry.The department is aiming to begin soliciting applications for the funding from companies no later than February, and it could begin disbursing money by next spring, Gina Raimondo, the secretary of commerce, said in an interview.The fund, which was approved by Congress in July, was created to encourage U.S. production of strategically important semiconductors and spur research and development into the next generation of chip technologies. The Biden administration says the investments will lessen dependence on a foreign supply chain that has become an urgent threat to the country’s national security.“This is a once-in-a-lifetime opportunity, a once-in-a-generation opportunity, to secure our national security and revitalize American manufacturing and revitalize American innovation and research and development,” Ms. Raimondo said. “So, although we’re working with urgency, we have to get it right, and that’s why we are laying out the strategy now.”Trade experts have called the fund the most significant investment in industrial policy that the United States has made in at least 50 years.It will come at a pivotal moment for the semiconductor industry.Tensions between the United States and China are rising over Taiwan, the self-governing island that is the source of more than two-thirds of the most advanced semiconductors. Shortages of semiconductors have also helped to fuel inflation globally, by increasing delivery times and prices for electronics, appliances and cars.Semiconductors are crucial components in mobile phones, pacemakers and coffee makers, and they are also the key to advanced technologies like quantum computing, artificial intelligence and unmanned drones.With midterm elections fast approaching, the Biden administration is under pressure to demonstrate that it can use this funding wisely and lure manufacturing investments back to the United States. The Commerce Department is responsible for choosing which companies receive the money and monitoring their investments.In its strategy paper, the Commerce Department said that the United States remained the global leader in chip design, but that it had lost its leading edge in producing the world’s most advanced semiconductors. In the last few years, China has accounted for a substantial portion of newly built manufacturing, the paper said.The high cost of building the kind of complex facilities that manufacture semiconductors, called fabs, has pushed companies to separate their facilities for designing chips from those that manufacture them. Many leading companies, like Qualcomm, Nvidia and Apple, design chips in the United States, but they contract out their fabrication to foundries based in Asia, particularly in Taiwan. The system creates a risky source of dependence for the chips industry, the White House says.The department said the funding aimed to help offset the higher costs of building and operating facilities in the United States compared with other countries, and to encourage companies to build the larger type of fabs in the United States that are now more common in Asia. Domestic and foreign companies can apply for the funds, as long as they invest in projects in the United States.To receive the money, companies will need to demonstrate the long-term economic viability of their project, as well as “spillover benefits” for the communities they operate in, like investments in infrastructure and work force development, or their ability to attract suppliers and customers, the department said.Projects that involve economically disadvantaged individuals and businesses owned by minorities, veterans or women, or that are based in rural areas, will be prioritized, the department said. So will projects that help make the supply chain more secure by, for example, providing another production location for advanced chips that are manufactured in Taiwan. Companies are encouraged to demonstrate that they can obtain other sources of funding, including private capital and state and local investment.The Commerce Department is setting up two new offices housed under the National Institute of Standards and Technology to set up the programs.One of the department’s biggest challenges will be ensuring that the government funds add to, rather than displace, money that chip making companies were already planning to invest. Companies including GlobalFoundries, Micron, Qualcomm and Intel have announced plans to make major investments in U.S. facilities that may qualify for government funding.The chips bill specifies that companies that accept funding cannot make new, high-tech investments in China or other “countries of concern” for at least a decade, unless they are producing lower-tech “legacy chips” destined to serve only the local market.The Commerce Department said it would review and audit companies that receive the funding, and claw back funds from any company that violates the rules. The guidelines also forbid recipients from engaging in stock buybacks, so that taxpayer money doesn’t end up being used to reward a company’s investors.“We’re going to run a serious, competitive, transparent process,” Ms. Raimondo said. “We are negotiating for every nickel of taxpayer money.”In addition to the new prohibitions on investing in chip manufacturing facilities in China, officials in the Biden administration have agreed that the White House should take executive action to scrutinize outbound investment in other industries as well, Ms. Raimondo said.But she added that the administration was still working through the details of how to put such a policy in place.Earlier versions of the chips bill also proposed setting up a broader system to review investments that U.S. companies make abroad to prevent certain strategic technologies from being shared with U.S. adversaries. That provision, which would have applied to cutting-edge technologies beyond the chips sector, was stripped out of the bill, but officials in the Biden administration have been considering an executive order that would establish a similar review process.The United States has a review system for investments that foreign companies make in the United States, but not vice versa.The Biden administration has also taken steps to restrict the types of advanced semiconductors and equipment that can be exported out of the United States.In statements last week, Nvidia and Advanced Micro Devices, both based in Silicon Valley, said they had been notified by the U.S. government that exports to China and Russia of certain high-end chips they produce for use in supercomputers and artificial intelligence were now restricted. These chips help power the kind of supercomputers that can be used in weapons development and intelligence gathering, including large-scale surveillance. Ms. Raimondo declined to discuss the export controls in detail but said the department was “constantly evaluating” its efforts, including how best to work with allies to deny China the equipment, software and tooling the country uses to enhance its semiconductor industry. More