U.S. to Blacklist 30+ Chinese Companies, Including 3D NAND Maker YMTC

The U.S. government is set to add China-based 3D NAND maker YMTC to the Department of Commerce's "Entity List" this week, along with dozens of other high-tech companies from the People's Republic, according to a report by DigiTimes. Companies on the Entity List will not be able to procure equipment, software, and other technologies from American companies— unless the latter obtain a special export license from the DoC. 

As a maker of 3D NAND, YMTC already faced problems created by the U.S. government's sweeping sanctions against Chinese semiconductor sector. YMTC is already unable to procure American wafer fab equipment (WFE) to make 3D NAND with 128 or more layers. As a result, four leading U.S. makers of chipmaking tools have already stopped working with YMTC, as they must get appropriate export licenses from the Department of Commerce.  

Being placed on the Entity List creates further difficulties for YMTC, as it will now also lose access to all kinds of wafer fab equipment that is made in the U.S. or that contains American IP (including tools for inspection), software, and other technologies.  

The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce added Yangtze Memory Technologies Company along with 30 other entities to the Unverified List (UVL) in early October as it could not identify bona fides (end users) of their products and whether said bona fides were involved in boosting China's military capabilities. 

Once a company is placed on the UVL, it has 60 days to prove its products do not break any export regulation rules. This usually means the company must allow the U.S. DoC to conduct inspections and verifications. If the checks are unable to be completed to the U.S. DoC's satisfaction, the company is then placed on the Entity List.

Although the Chinese government appeared to relent last week, allowing U.S. export control to inspect several entities (including YMTC), these checks take some time. It looks like they haven't been completed yet, and so YMTC and the other companies will be placed on the Entity List for the time being. 

The Entity List is essentially a blacklist, and getting blacklisted is a big deal, because YMTC will lose access to all American technologies subject to regulations. When Huawei and its subsidiaries were placed on the Entity List, they lost access to software and hardware that used any technology designed in the U.S., including (but not limited to) electronic design automation (EDA) software used for chip design, as well as chips produced by TSMC. This significantly constrained Huawei's ability to develop its system-on-chips, and almost eliminated its ability to make them in volume. 

Now, YMTC and 30 other Chinese companies will face the same issues as Huawei — and only time will tell whether all of them will be able to survive without access to American technology.