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The U.S. has wielded its trading powers for years to curb advanced chipmaking shipments to China, but it’s now reportedly considering tougher trade rules if allies continue selling chip tech to China.
The Biden administration is debating using an export control called the foreign direct product rule, which would impact companies including Japan’s Tokyo Electron and Dutch chip machine-maker ASML, Bloomberg reported, citing unnamed people familiar with the matter. The rule does not allow the export of any good to any country if it is manufactured with a certain percentage of U.S. intellectual property components.
The Biden administration is reportedly telling officials in Tokyo and the Hague about its consideration if Japan and the Netherlands don’t tighten their export controls against China. Meanwhile, nearly half of ASML’s revenue for the second-quarter came from sales to China, Bloomberg reported. ASML is the only company in the world that makes the equipment needed for advanced chips manufacturing.
However, U.S. allies don’t feel compelled to implement restrictions with the upcoming U.S. presidential election, and U.S. companies feel unfairly squeezed by the export controls, Bloomberg reported. Some U.S. companies, including chip equipment-makers Applied Materials and Lam Research, have reportedly told U.S. officials that current trade restrictions are hurting them and not as effective against China. The chip industry is instead suggesting the U.S. expand criteria for its unverified list, which requires companies to have a license to sell restricted items.
Global chip stocks fell Wednesday morning, following news of the Biden administration’s reported consideration of the FDPR and remarks by former President Donald Trump on Taiwan. ASML’s Netherlands-listed shares slipped around 10%, while Tokyo Electron’s shares were down nearly 7.5% at the close in Japan. TSMC’s Taiwan-listed shares were down 2.4% at the market close. Meanwhile, during pre-market trading, U.S.-based Nvidia’s shares were down 4%, and Applied Materials’ shares were down 5.24%. Both Nvidia’s and Applied Materials’ shares fell further during morning trading, down 5.9% and 7.3%, respectively.