U.S. Govt Blacklists Chinese Tech Firms Loongson and Inspur

This week, the U.S. government blacklisted CPU designer Loongson and server maker Inspur, alleging that these companies support the modernization of the Chinese People's Liberation Army. The addition to the Entity List limits Inspur's and Loongson's access to technologies originating from the U.S., which essentially curbs their existing business and ability to develop new products.

The U.S. Department of Commerce added Inspur and Loongson to the Entity List after it found that the entities acquired 'U.S.-origin items in support of China's military modernization efforts.' The U.S. DoC does not determine which items were procured but could include U.S.-sourced goods, software, services, and technologies. 

From now on, U.S.-based producers of hardware, software, and services and foreign companies that use American technologies (e.g., contract makers of chips that use tools made in the U.S.) must obtain an appropriate export license from the U.S. Department of Commerce. License applications are set to be reviewed with a presumption of denial.

No More Chip Production for Loongson?

Loongson is a major CPU developer from China, which has for years used the MIPS instruction set architecture (ISA) originally designed in the U.S. Loongson's latest quad-core 3A5000, 16-core 3C5000, and 32-core 3D5000 processors based on the LA464 cores use the company's own LoongArch ISA, which reportedly features nearly 2,000 proprietary instructions. As a result, these CPUs can take advantage of multiple architectural innovations — such as binary conversion extension instructions (LBT), vector processing extension instructions (LSX), and advanced vector processing extension instructions (LASX) — yet they maintain backward compatibility with MIPS. In addition, they can also execute code written for previous-generation Loongson processors. 

Virtually all chips designed in China are developed using electronic design automation (EDA) tools of U.S. origin. Furthermore, they are made — either by China-based SMIC or Taiwan-based TSMC or UMC — using tools produced in the USA.  

Now that Loongson has joined the Entity List, all of its EDA and chip fabrication partners (SMIC) will have to apply for an export license to the U.S. DoC to continue working with the CPU designer. SMIC, which has been under heavy attack from the U.S. government for years, will unlikely to get one, so formally it will not be able to service Loongson, which uses SMIC's 12nm-class manufacturing technology for its latest processors. 

No More Hardware for Inspur?

Backlisting Inspur is a big deal. Inspur is a huge IT conglomerate focused on AI, big data, cloud computing, servers, and storage. It also happens to be the world's third-largest maker of servers, with a 10% market share. Inspur does not develop its own silicon, but relies on CPUs, GPUs, and other chips designed by industry leaders, such as Intel and Nvidia.

Inspur already cannot procure advanced CPUs and GPUs used to build powerful supercomputers after the Biden administration imposed curbs against the Chinese supercomputer sector in October 2021 without an appropriate export license. But now, the company's suppliers will have to obtain export licenses for virtually all components and software they sell to Inspur, which includes memory modules, storage devices (HDDs, SSDs), network controllers, NVMe/SAS/RAID controllers, software, and perhaps even power supplies. 

While we would expect the U.S. DoC to grant export licenses to many Inspur suppliers, it might not be enough to support the company's needs. This will hurt many Inspur suppliers, which include familiar names like Intel, Nvidia, Broadcom, Microsemi, Samsung, Solidigm, and SK Hynix, to name a few.

35 More Entities Blacklisted

"The ERC determined to add 4Paradigm Technology, Inspur Group Co., Loongson Technology, National Research Center for Parallel Computer Engineering and Technology, Qingdao National Laboratory of Marine Science and Technology, Wuxi Institute of Advanced Technology to the Entity List for acquiring and attempting to acquire U.S.-origin items in support of the China’s military modernization efforts. This activity is contrary to U.S. national security and foreign policy interests," a statement of the Bureau of Industry and Security of the U.S. Department of Commerce reads. "All of these entities will require a license for items subject to the EAR, which will be reviewed under a presumption of denial. They are also given a footnote 4 designation, which means that 'items subject to the EAR' for the purpose of these license requirements include foreign-produced items that are subject to the Export Administration Regulations." 

In addition to Inspur and Loongson, the BIS of the U.S. DoC added 35 more entities from Belarus (1), Burma (3), China (26), Pakistan (4), Russia (1), and Taiwan () into the Entity List.