US to blacklist China’s YMTC, crackdown on AI chip sector

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The Biden administration on Thursday plans to add Chinese memory chipmaker YMTC and 21 “major” Chinese players in the artificial intelligence chip industry to a trade blacklist, broadening its crackdown on China’s chip industry, the Commerce Department said.

YMTC, long in the crosshairs of the US government, will be added to the list over fears it could divert US technology to previously blacklisted Chinese tech giants Huawei and Hikvision.

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The move will bar YMTC’s suppliers from shipping US goods to it without a difficult-to-obtain license.

The 21 Chinese AI chip entities being added to the trade blacklist, which include Cambricon and CETC, will face an even tougher penalty, with the US government effectively blocking their access to technology made anywhere in the world with US equipment.

As the Chinese government seeks to remove barriers between its military and civilian sectors, “US national security interests require that we act decisively to deny access to advanced technologies,” Assistant Secretary of Commerce for Export Administration Thea Kendler said in a statement.

The move builds on sweeping export controls imposed on Beijing in October to slow Beijing’s technological and military advances, including measures to curb China’s access to US chipmaking tools and cut it off from certain chips made anywhere in the world with US equipment.

It also comes as the US Congress prepares to finalize legislation to bar the US government from buying products that contain semiconductors made by YMTC, Chinese memory chipmaker CXMT or China’s top chip manufacturer SMIC.

The Commerce Department on Thursday will also target nine Chinese entities for allegedly seeking to support China’s military modernization, including Shanghai Micro Electronics Equipment Group Co Ltd (SMEE), China’s only lithography company.

A total of 35 Chinese entities will be added to the trade blacklist, known as the entity list.

But Thursday’s announcements won’t be all bad news for Beijing. The Biden administration plans to remove 26 Chinese entities from the so-called unverified list thanks to successful site visits. Reuters reported on Wednesday that such a move was in the works.

Companies are added to the unverified list if the United States cannot complete on-site visits to determine if they can be trusted to receive sensitive US technology exports, inspections which in China require approval from the commerce ministry.

Being added to the unverified list forces US suppliers to perform greater due diligence before shipping to the targeted companies.

Commerce Department officials have attributed greater cooperation from Beijing in site checks to a new rule announced in October. Under that rule, if a government prevents US officials from conducting site checks at companies on the unverified list, Washington may add them to the entity list after sixty days.

Under that new policy, the Commerce Department on Thursday plans to remove nine Russian entities from the unverified list and add them to the entity list because the US has been unable to conduct site visits.

Top Senate Democrat Chuck Schumer heralded the imposition of new penalties on YMTC.

“YMTC poses an immediate threat to our national security, so the Biden Administration needed to act swiftly to prevent YMTC from gaining even an inch of a military or economic advantage,” he said in a statement.

Read more: US aims to hobble China’s chip industry with sweeping new export rules

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