US Could Apply Severe Restrictions On China That Borders On “Draconian”

The US government is reportedly considering the imposition of more severe measures or restrictions on China’s access to advance chipmaking tools. While not yet in place, many of the country’s close allies think that they may be a step too far, with some even describing them as “draconian”.

Some of the key proposals include the application of the Foreign Direct Product (FDP) rule, which allows the US to exert control over the foreign-produced items that were assembled using any American technology. Not only that, but the rule would also force its allies into limited service and repair of equipment in China, as well as broaden the list of requiring licenses for specific technologies.

Of the businesses affected by this “draconian” rule, Japan’s Tokyo Electron and the Netherlands’ ASML would be two key players that would feel the brunt of it. For that matter, the US is also pressuring said companies, among others, into exacting its will of limiting their services to China, something that US firms are barred from doing.

Another strategy involves the US expanding the criteria for its unverified list. This list would require companies to obtain licenses for shipping certain restricted technologies. As you can imagine, this means companies dealing with Chinese customers deemed a security risk could face consequences, which again could prevent said Chinese companies from circumventing current restrictions by relying on foreign equipment and expertise.

While the “draconian” steps have yet to be implemented, experts are of the mind that doing this may have an adverse effect. While it may curb Chinese advancement in the semiconductor industry, new restrictions could end up hurting the sales and profit numbers of several US and allied nation companies.

(Source: Bloomberg, Tom’s Hardware)