New export controls on semiconductor and advanced computing related items to China

The US Department of Commerce, Bureau of Industry and Security (BIS) issued an interim final rule (the Rule) modifying the Export Administration Regulations (EAR) to impose significant new export restrictions that are intended to restrict China's ability to obtain advanced computing chips, develop and maintain supercomputers and manufacture advanced semiconductors. The new Rule aims to accomplish those goals via:

1. New export restrictions: Implementing new export restrictions on the export or re-export to, or transfer within, China of:

• High-performance semiconductor chips (i.e. integrated circuits (ICs) that have or are programmable to have an aggregate bidirectional transfer rate over all inputs and outputs of 600 Gbyte/s or more and meet certain other criteria)
• Items containing high-performance semiconductor chips;
• Certain semiconductor manufacturing deposition equipment; and
• Software and technology associated with all of the above;

2. New end-use export restrictions: Implementing new end-use export restrictions on the export or re-export to, or transfer within, China of any item, or a subset of items, subject to the EAR where the exporter has knowledge, or lacks the ability to know, that the items are intended for use in developing or fabricating certain high performance semiconductor chips in China or in "supercomputers" (i.e. "computing systems" having a collective maximum theoretical computer capacity of 100 or more double-precision (64-bit) petaflops or 200 or more single-precision (32-bit) petaflops within a 41,600 ft³ or smaller envelope);

3. US person prohibitions: Extending relatively unused sanctions style restrictions in the EAR to prohibit US persons from shipping, transmitting, transferring, facilitating the movement of, or servicing any items not subject to the EAR where the exporter has knowledge, or lacks the ability to know, that the items are intended for use in developing or fabricating certain high performance semiconductor chips or semiconductor manufacturing equipment in China;

4. Expanded Foreign Direct Product (FDP) restrictions: Expanding the scope of foreign direct product restrictions on the export or reexport to, or transfer within, China of certain foreign-produced advanced computing and semiconductor-related items that are the direct product of certain US-origin technologies;

5. Restricted license exceptions: Restricting the availability of most license exceptions for the export of high performance semiconductors and advanced computing items to China;

6. Mass-market encryption restrictions: Restricting the export of mass-market encryption items to China that meet the performance criteria for high performance ICs or advanced computing items; and

7. Restrictions on exports from China: Restricting the export of certain advanced computing and semiconductor related items from China to any destination worldwide.

Although the new restrictions all became effective on, or before, October 21, 2022, BIS is inviting public comments to the Rule through November 13, 2022.

Many of the key provisions in the new Rule are quite vague, and some key terms are left undefined. BIS has, to date, not issued any of the promised FAQ guidance, and a public briefing on October 13, 2022 provided little needed clarity. Without such clarity, many of the new restrictions appear quite broad and are likely to have, at least in the short term, a dramatic impact on the semiconductor industry.

In order to alleviate some of the burden on industry, BIS did, however, issue a temporary general license that, as detailed below, allows certain prohibited exports to, or transfers within, China to continue through April 7, 2023, so long as the shipment is made by companies headquartered in certain countries friendly to the United States and is intended to support manufacturing of items destined for end-use outside of China.

The new Rule, moreover, is only one of many measures the United States is implementing to limit Chinese access to these types of advanced semiconductor and supercomputer products and technologies. For example, in addition to naming numerous Chinese entities to the Entity and Unverified Lists, BIS has, in recent months, also imposed export restrictions on specific advanced integrated circuits essential for certain artificial intelligence applications and advanced semiconductor and gas turbine engine technologies.

In addition, and as we discussed in an earlier update, President Biden issued an executive order last month directing the Committee on Foreign Investment in the United States (CFIUS) to, inter alia, consider US technological leadership in these areas when evaluating foreign investments involving the US semiconductor and advanced computing sectors. In addition, further export restrictions are purportedly being considered in the areas of artificial intelligence and quantum computing.

Although no other countries have yet joined the US in issuing similar restrictions, it is expected that the United States will continue efforts to convince allies such as the EU, UK, and Canada, as well as other countries with advanced semi-conductor manufacturing capabilities, to do so.

Any companies involved in the export or reexport of semiconductor or advanced computing relating products, equipment, software or technologies to, or within, China should review these new restrictions carefully and consider whether modifications to their existing compliance programs may be required.

The following analysis breaks down the new Rule and the restrictions it creates in greater detail.

Restrictions on high performance semiconductor chips

The new Rule restricts, via the addition of ECCN 3A090 to the EAR, exports or re-exports to, or transfers within, China of ICs that have, or are programmable to have, an aggregate bidirectional transfer rate over all inputs and outputs of 600 Gbyte/s or more to or from ICs other than volatile memories and that have one of the four additional criteria identified in 3A090.a.1-4 and listed below:

1. One or more digital processor units executing machine instructions having a bit length per operation multiplied by processing performance measured in TOPS, aggregated over all processor units, of 4800 or more;

2. One or more digital 'primitive computational units,' excluding those units contributing to the execution of machine instructions relevant to the calculation of TOPS for 3A090.a.1, having a bit length per operation multiplied by processing performance measured in TOPS, aggregated over all computational units, of 4800 or more;

3. One or more analog, multi-value or multi-level 'primitive computational units' having a processing performance measured in TOPS multiplied by 8, aggregated over all computational units, of 4800 or more; or

4. Any combination of digital processor units and 'primitive computational units' whose calculations according to 3A090.a.1, 3A090.a.2, and 3A090.a.3 sum to 4800 or more.

As identified in a note to 3A090.a, potentially impacted ICs include: graphical processing units (GPUs), tensor processing units (TPUs), neural processors, in-memory processors, vision processors, text processors, co-processors/accelerators, adaptive processors, field-programmable logic devices (FPLDs) and application-specific integrated circuits (ASICs).

In addition, separate export restrictions on software and technology related to items controlled in ECCN 3A090 were added in ECCNs 3D001, 3E001, respectively. All of the new ECCNs are controlled for RS for China and AT purposes for other countries.

Restrictions on items containing high performance semiconductor chips

The new Rule restricts, via the addition of ECCN 4A090 to the EAR, the export, re-export or transfer within China of computers, "electronic assemblies," and "components" that contain ICs which are controlled for export under the aforementioned criteria identified in ECCN 3A090.

In addition, separate export restrictions on "software" and "technology" related to items controlled under ECCN 4A090 were added in ECCNs 4D090, and 4E001, respectively. All of the new ECCNS are controlled for RS for China and AT purposes for other countries.

Restrictions on semiconductor manufacturing equipment and related items

The new Rule restricts, via the addition of ECCN 3B090 to the EAR, the export, re-export or transfer within China of semiconductor manufacturing deposition equipment that meet the criteria set forth in 3B090a.1-a.10 and listed below:

1. Equipment for depositing cobalt through electroplating processes;

2. Chemical vapor deposition equipment capable of deposition of cobalt or tungsten fill metal having a void/seam having a largest dimension less than or equal to 3 nm in the fill metal using a bottom-up fill process;

3. Equipment capable of fabricating a metal contact within one processing chamber by:

• Depositing a layer using an organometallic tungsten compound while maintaining the wafer substrate temperature between 100 °C and 500 °C; and
• Conducting a plasma process where the chemistries include hydrogen, including H2 and NH 3.

4. Equipment capable of fabricating a metal contact in a vacuum environment by:

• Using a surface treatment during a plasma process where the chemistries include hydrogen, including H2, H2+N2, and NH3, while maintaining the wafer substrate temperature between 100 °C and 500 °C;
• Using a surface treatment consisting of a plasma process where the chemistries include oxygen (including O2 and O3) while maintaining the wafer substrate temperature between 40 °C and 500 °C; and
• Depositing a tungsten layer while maintaining the wafer substrate temperature between 100 °C and 500 °C.

5. Equipment capable of depositing a cobalt metal layer selectively in a vacuum environment where the first step uses a remote plasma generator and an ion filter, and the second step is the deposition of the cobalt layer using an organometallic compound;

6. Physical vapor deposition equipment capable of depositing a cobalt layer with a thickness of 10 nm or less on a top surface of a copper or cobalt metal interconnect';

7. Atomic layer deposition equipment capable of depositing a 'work function metal' for the purpose of adjusting transistor electrical parameters by delivering an organometallic aluminum compound and a titanium halide compound onto a wafer substrate;

8. Equipment capable of fabricating a metal contact in a vacuum environment by depositing all of the following:

• A titanium nitride (TiN) or tungsten carbide (WC) layer using an organometallic compound while maintaining the wafer substrate temperature between 20 °C and 500 °C;
• A cobalt layer using a physical sputter deposition technique where the process pressure is 1-100 mTorr while maintaining the wafer substrate temperature below 500 °C; and
• A cobalt layer using an organometallic compound, where the process pressure is 1-100 Torr, and the wafer substrate temperature is maintained between 20 °C and 500 °C.

9. Equipment capable of fabricating copper metal interconnects in a vacuum environment that deposits all of the following:

• A cobalt or ruthenium layer using organometallic compound where the process pressure is 1-100 Torr, and the wafer substrate temperature is maintained between 20 °C and 500 °C; and
• A copper layer using a physical vapor deposition technique where the process pressure is 1-100m Torr and the wafer substrate temperature is maintained below 500 °C.

10. Equipment capable of area selective deposition of a barrier or liner using an organometallic compound.

Technology and software associated with such manufacturing items are controlled under ECCNs 3D001 and 3E001, respectively. All of the ECCNs are controlled for RS purposes for China and AT for other countries.

End use export restrictions

The new Rule also imposes new end-use restrictions by adding section 744.23 to the EAR that, as set forth below, requires a license for export to China of all, or a subset of all, items subject to the EAR if they are intended for certain semiconductor manufacturing or supercomputer end uses.

Semiconductor manufacturing end use restrictions

The new Rule restricts the export or re-export to, or transfer within, China of:

• Any item subject to the EAR when there is knowledge that the item is destined for end use in the development or production of ICs at a semiconductor fabrication facility in China that fabricates ICs meeting any of the following criteria in 15 C.F.R. 744.23(a)(2)(iii)(A)-(C):
  • (iii)(A) Logic ICs using a non-planar transistor architecture or with a "production" technology node of 16/14 nanometers or less;
  • (iii)(B) NOT AND (NAND) memory integrated circuits with 128 layers or more; or
  • (iii)(C) Dynamic random-access memory (DRAM) integrated circuits using a "production" technology node of 18 nanometer half-pitch or less;
• Any item controlled under Category three, Product Groups B, C, D, or E, of the EAR when there is knowledge that the items will be used in the development or production of ICs at a semiconductor fabrication facility located in China, but there is no knowledge of whether the facility fabricates ICs that meet the above criteria under 15 C.F.R. 744.23(a)(2)(iii)(A)-(C); and
• Any item subject to the EAR when there is knowledge the item will be used in the development or production in China of any parts, components or equipment specified under ECCN 3B001, 3B002, 3B090, 3B611 or 3B991.

Supercomputer end use restrictions

The new Rule restricts the export or re-export to, or transfer within, China of the below bulleted items when there is knowledge that the item will be used in: (i) the development, production, use, operation, installation (including on-site installation), maintenance, repair, overhaul or refurbishing of a supercomputer located in or destined to China; or (ii) the incorporation into, or the development or production of any component or equipment that will be used in a supercomputer located in, or destined to China:

• Any IC subject to the EAR and specified in ECCN 3A001, 3A991, 4A994, 5A002, 5A004 or 5A992; or
• Any computer, electronic assembly, or component subject to the EAR and specified in ECCN 4A003, 4A004, 4A994, 5A002, 5A004 or 5A992.

A supercomputer is defined to include a "computing 'system' having a collective maximum theoretical computer capacity of 100 or more double-precision (64-bit) petaflops or 200 or more single-precision (32-bit) petaflops within a 41,600 ft³ or smaller envelope."

US person restrictions

Pursuant to 15 CFR 744.6(b), US persons (i.e. US organized entities, US citizens, US permanent residents, and persons physically located in the United States) are prohibited from engaging in the following transactions involving items that are not subject to the EAR (i.e. foreign manufactured items that contain no or de minimis US-origin content):

• Shipping, transmitting, transferring, or facilitating movement, to or within China, or servicing, any item not subject to the EAR, with knowledge that the item will be used in the development or production of ICs at fabrication facility in China that produces ICs meeting any of the following criteria:
  • Logic integrated circuits using a non-planar architecture or with a "production" technology node of 16/14 nanometers or less;
  • NOT-AND (NAND) memory integrated circuits with 128 layers or more; or
  • Dynamic random-access memory (DRAM) integrated circuits using a "production" technology node of 18 nanometer half-pitch or less.
• Shipping, transmitting, transferring or facilitating movement, to or within China, or servicing, any item not subject to the EAR and meeting the parameters of Category three, Product Groups B, C, D, or E, with knowledge that the item will be used in the development or production of ICs at any semiconductor fabrication facility and where it is unknown if the facility fabricates ICs that meet the above criteria;
• Shipping, transmitting, transferring, or facilitating movement or servicing, any item that is subject to the EAR and meets the parameters of ECCN 3B090, 3D001 (for 3B090), or 3E001 (for 3B090) if intended for delivery to, or transfer within, China.

Expansion of foreign direct product rules

The new Rule expands the foreign direct product rules (FDP) in 15 C.F.R. 734.9 to impose restrictions on the export, re-export, or transfer within China, of the below bulleted items produced outside the United States that are either the direct product of software or technology subject to the EAR and specified in certain ECCNs listed below; or (2) produced by a plant or major component of a plant that is itself the direct product of US-origin technology or software specified in the same ECCNs,

• Entity List FDP rule: Any foreign produced items that meet the above criteria and are intended for delivery to Chinese entities designated on the Entity List pursuant to newly created footnote 4;
• Supercomputer FDP rule: Any foreign produced item that meets the above criteria and where there is knowledge that the foreign produced item will be:
  • Used in the design, development, production, operation, installation (including on-site installation), maintenance, repair, overhaul or refurbishing of a supercomputer located in or destined to China; or
  • Incorporated into, or used in the development or production of any part, component, or equipment, that will be used in a supercomputer located in or destined to China.
• Advanced Computing FDP Rule: Foreign produced items that meet the above criteria and which: (i) meet the criteria of ECCNs 3A090, 3E001 (when involving 3A090 items), 4A090 or 4E001 (when involving technology for 4A090 items); or (ii) are an IC, computer, electronic assembly or component that meet the performance criteria of ECCN 3A090 or 4A090; and (iii) where there is knowledge that either the foreign produced item is:
  • Destined to China or will be incorporated into any non-EAR99 part, component, computer, or equipment that is destined for China; or
  • Technology developed by a China-headquartered entity for production of a mask or an IC wafer or die.

The relevant ECCNs for the US-origin technology, software, or plant that the foreign-produced item must be the direct product of include: 3D001, 3D991, 3E001, 3E002, 3E003, 3E991, 4D001, 4D993, 4D994, 4E001, 4E992, 4E993, 5D001, 5D002, 5D991, 5E001, 5E002 or 5E991.

Temporary general license

The new Rule creates, via supplement number 1 to Part 736 of the EAR, a temporary general license (TGL) which authorizes, through April 7, 2023, companies headquartered in countries friendly to the United States to continue limited integration, assembly, testing and distribution activities in China but only so long as the finished items are intended for end use by parties outside of China.

More specifically, the TGL authorizes exports and re-exports to, and transfers within, China by companies not headquartered in Country Groups D:1 or D:5 or E (as set forth in Supplement number1 to Part 740 of the EAR) for such companies to continue to engage in integration, assembly (mounting), inspection, testing, quality assurance and distribution of high performance chips and advanced computing items classified in ECCNs 3A090 or 4A090 and associated software and technologies classified in ECCNs 3D001, 3E001, 4D090, or 4E001.

Restricted license exceptions

The new Rule significantly restricts the availability of license exceptions in Part 740 of the EAR for exports or re-exports to, or transfers within, China. More specifically, exports or re-exports to, or transfers within, China of items classified in the following RS controlled ECCNs are only eligible for license exceptions RPL, GOV, and TSU:

• 3A090;
• 4A090;
• 3D001 or 3E001 (when related to 3A090 items);
• 4D090; and
• 4E001 (when related to 4A090 items).

Restrictions on mass-market encryption items

The new Rule revises ECCNs 5A992.c and 5D992.c to control for RS reasons the export or re-export, or transfer within, China of mass-market encryption items classified under those categories and that meet or exceed the performance specifications in ECCN 3A090 or 4A090. Previously, such items were only controlled for AT purposes.

Restrictions on exports from China

The new Rule imposes, pursuant to 15 C.F.R. 742.6(a)(6), a license requirement for the export from China to any destination worldwide of technology for the design, development or production of advanced computer chips which:

• Are developed by an entity headquartered in China;
• Are the direct product of software subject to the EAR; and
• Are for the production of high performance ICs that meet the performance criteria of ECCN 3A090 or items for advanced computing that meet the performance criteria of ECCN 4A090.

Deemed exports

The new RS license restrictions to China do not apply to deemed exports or re-exports to Chinese nationals located outside of China.

Licensing policy

BIS has declared that license applications for items subject to the new RS controls for China will be subject to a presumption of denial except that there will be a case-by-case review of applications related to semiconductor manufacturing items destined to end users located in China that are headquartered in the United States or in a country in Country Group A:5 or A:6.

Our team will continue to monitor this space and provide additional updates as appropriate.

Special thanks to Claire Huitt and Daniella Torrealba for their assistance in preparing this content.