The U.S. Department of Commerce on Friday added 31 companies from China to its Unverified List (UVL), a step that precedes the addition to the Entity List. Among the entities added to the UVL is Yangtze Memory Technologies Co. and various companies involved in Chinese semiconductor and adjacent high-tech industries. Inclusion to the UVL adds roadblocks for companies to acquire technologies from the U.S.
The U.S. DoC's UVL includes entities whose bona fides (end users) could not be identified "satisfactorily for reasons outside the U.S. Government's control." Inclusion to the UVL means that U.S. suppliers with ties to such companies will have to conduct additional due diligence to verify end users of final products before shipping their tools to entities from the list, reports Reuters. This might potentially mean they will have to apply for additional licenses. Meanwhile, unlike inclusion to the DoC's Entity List, inclusion into the UVL does not mean that U.S. companies will have to get special export licenses for all the goods they ship to the listed companies.
The inclusion of YMTC into the UVL means that U.S.-based producers of chipmaking tools and software must perform additional checks and notify the U.S. government before shipping their equipment to the 3D NAND memory maker. This does not completely cut off YMTC from new fab tools but makes it harder for the company to procure equipment from companies like Applied Materials, KLA, or Lam Research. Furthermore, some licenses will likely not be granted.
"The use of license exceptions for exports, reexports, and transfers (in-country) involving a party or parties to the transaction who are listed on the UVL is suspended," a statement of the DoC reads. "Additionally, […] there is a requirement for exporters, re-exporters, and transferors to obtain (and maintain a record of) a UVL statement from a party or parties to the transaction who are listed on the UVL before proceeding with exports, reexports, and transfers (in-country) to such persons, when the exports, reexports and transfers (in-country) are not subject to a license requirement. Finally, […] Electronic Export Information (EEI) must be filed in the Automated Export System (AES) for all exports of tangible items subject to the EAR when a party or parties to the transaction is/are listed on the UVL."
U.S. officials have been talking about restricting YMTC's access to technologies with American origins for weeks now, but the government has not yet blacklisted the company.
The Biden administration is also considering toughening up access of China-based semiconductor companies to leading-edge equipment used to make chips on 14nm/16nm-class production technologies. This will not disrupt supplies of advanced tools to Samsung and SK Hynix that make 3D NAND and DRAM chips in China, according to a Reuters report, but will substantially affect the competitive positions of companies like Semiconductor Manufacturing International Co. or Yangtze Memory.
The Semiconductor Industry Association (SIA) has yet to assess how the new export control rules affect U.S.-based chipmaking tools companies.
"We are assessing the impact of the new export controls on the U.S. semiconductor industry and working with our member companies and the U.S. government to ensure compliance," a statement by the SIA reads. "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."
The whole problem is, once even just a single company decides to outsource any work to a country where existing, asymmetric commercial-government relationships exist that make their service cost anticompetitive by design, its closest competitors must by definition follow suit to remain competitive (i.e. stay in business)—meaning, in the sufficient long run, just about every industry besides those that cannot be outsourced (in the limit, only health care, which must remain a mostly local service—at least based on current legal stipulations in the U.S., as well as current technological limitations) is eventually affected, as the core logic works its way through the system.
In fact, I'm pretty sure it was for similar reasons that there used to exist some kind of formally defined law that made it illegal to do business with the USSR (back in the day...). It was fully understood back then that any mere commercial entity in the U.S., if it entered into a business relationship with a corresponding entity in the USSR, it was in actuality doing business with the soviet government, which would hopelessly outclass it and crush it, using the financial, legal, and perhaps even military resources that only a government has legal access to. In other words, it would from the start never be a relationship that was in any way proportional, fair, or even competitive.
When the Chinese solar panel industry bankrupted its equivalent in the U.S., it did so not because it was more competitive, but because it was so heavily subsidized by the CCP that it could undercut its competition to the point of literally selling at less than cost, unlike the competition which at bare minimum had to remain in the black (meaning, operating without any profit, which at the very least would turn off investors and lead to stagnant innovation), merely to continue to exist.
Of course you could say it's a good thing they figured out a way to respond in kind to the games the CCP has been playing since the moment they were admitted into the WTO, which never had anything to do with competitive pricing or service provision, as the CCP's heavy handed manipulation was already established as fact ten years ago, after an investigation showed that both Huawei and ZTE had received $30 billion of funds from the central bank. And this doesn't even begin to discuss all the forced tech IP transfers and outright IP theft that took place simultaneously.
When the CCP talks with increasing aggression about invading and subjugating Taiwan, it isn't about any historic claims that exist purely on imagined grounds (how can a significant geographic area with 23 million or so current inhabitants that was at no point in its history under the control of a government, which today has the shameless audacity to describe it as a "breakaway province?" It doesn't even take a child to understand that this claim cannot possibly be true if we interpret the word "province" by its existing definition, i.e. "a territory governed as an administrative or political unit of a country or empire." How can a government that never in its short hundred year history exercised administrative control over a region possibly claim authority over said region on legally defensible grounds? Not that the CCP hasn't already flaunted international law directly and openly, when it dismissed the international court ruling in 2016 regarding the invalidity of using artificially constructed islands in the South China Sea to the most outrageous territorial proclamations—a ruling that was notably based on the same treaty (named the "United Nations Convention on the Law of the Sea," or UNCLOS) which the CCP itself had been a signatory to only years prior, insisting instead that the ruling was without merit because it came about due to U.S. influence. I mean, it's a blatantly shameless lie that's the literal equivalent of gaslighting the world and then daring it to step.
No, the reason in significant part is to appropriate the world class semiconductor industry that happens to be based in Taiwan, a country that only happens to share its language but is culturally and ideologically orthogonal to the mainland. Which, by the way, if and when that eventuality ever plays out to their satisfaction, just you wait, because then you'll get a real taste of the concept of throwing one's weight around, son.
So, yeah—stuff like in this article is like a soft glove tap in response to two decades of wanton, egregious, and unilateral abuse, conducted with overtly nefarious intent. That alone was already demonstrated in the 90s, when Clinton OK'd the transfer of sophisticated tooling equipment in exchange for a sizeable order of airplanes from a struggling U.S. defense contractor, on the promise that the tools would not be used for the manufacture of materiel. Admittedly, this was never anything more than a "Gentlemen's Agreement;" but at the very least, it already proved beyond all doubt that when it came to the CCP, there wasn't even one cogent reason to expect gentlemanly conduct.
And yes, I lay the blame squarely at the feet of the CCP, not the Chinese people, who are mere pawns to be used and abused as the CCP sees fit, the same as many small nations and soon the rest of the world, if things continue unabated on current trajectories. Stuff like in this article is really too little too late, but at least better than rolling over, or even grabbing hold of your ankles and saying Uncle.
it doesn’t take a rocket scientist to figure out that you don’t move all of your production to other countries unless you’re retarded that is, or you have a plan to destroy this which is probably more likely
globalism sucks. Get used to it until we overthrow the people that run the world.
outsourcing is ill-advised in the long run and you will see a reversal, Mark, my words things just have to get worse in order to get better
When Huawei blatantly opened a subsidiary in Iran to sell equipment containing US parts and services. And when the pampered daughter of a CEO says these things in front of the bank management with abandon.I knew it was all over.
This is not the first time that this has happened in international markets. It has been recorded in Europe and Japan before.
But the European Community has a comprehensive set of laws to ensure that all participants in the Common Market follow the consensus and uses a range of tools to ensure that offenders must pay THE COST.
This also applies to Japan . But not in China.
So, if the capital system, in which the Chinese bureaucratic families have a stake or influence, decides to ignore this trade order. We do not have any intermediate tools. Either ignore it or reset everything to the way it was before they got involved.
It is very difficult to maintain a free trade order with an authoritarian and dictatorial government.
Huawei is not the first company to do so. Long before it, the Wahaha Group had agitated the national and propaganda establishment in order to renege on its contract with the French capital (huge sums of money owed and share compensation). The press played down the content of the contract. The French capital was portrayed as a foreign colonialist who had plundered China's wealth.
Now, this is just the same old trick.
For those who are rich and powerful in China ,they are trying to replicate their environment in China on the international stage. That is what has happened.
I have seen this happen every year I have been in China. If these people decide to ignore the law (which for them can be interpreted or ignored at will), there is nothing to punish them for. And Chinese citizens see this as a legal right . Many people there believe that it is unthinkable to stage a riot against the government.
So, whether it is the WAHAHA group or HUAWEI, what they have to do is simple. Play the role of a cynic. And express some cynical views. And then portray themselves as victims of racism and double standards. And then he gets the unconditional support of a billion people in an instant.
Simply put, I'm not surprised that all this happened today.This should have happened a long time ago.Americans and Europeans need to recognize that the overlap of job and commodity markets is conditional.