US tech firms face ‘death spiral’ from new China curbs: lawmakers

Washington’s plans to impose a new set of export curbs targeting China could send American technology companies into a ‘death spiral’, a group of US lawmakers have warned.

In a letter this week, California Democrats called on President Joe Biden to hold back plans to further tighten restrictions on the flows of US technology to China until Washington can bring its rivals into the fold.

Current unilateral curbs were benefitting foreign rivals at the expense of US businesses, they argued.

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The US has, since 2022, imposed a range of curbs to cut off China’s access to advanced chips and chipmaking technologies. Washington argues Beijing has been using the tech to empower its military.

US allies Japan and the Netherlands — home to powerful chip equipment makers ASML and Tokyo Electron — have also restricted equipment exports to China. But both have stopped short of matching some of the toughest US measures.

Washington now plans to introduce a new rule that would expand US powers to stop exports of semiconductor manufacturing equipment from some foreign countries to Chinese chipmakers. But firms in Japan and the Netherlands will remain exempt from those rules.

Those new measures “could send longstanding US companies into a death spiral,” because US allies have not imposed similarly aggressive China export curbs on their own companies, Californian Senator Alex Padilla and Representative Zoe Lofgren argued in a letter on Tuesday.

“We ask that you pause additional unilateral export controls until you have adequately justified that such controls will not damage US competitiveness in advanced semiconductors and semiconductor manufacturing equipment,” the lawmakers said in the letter, addressed to Alan Estevez, who oversees export controls at the Commerce Department.

Commerce said it had been contacted by the congressional office and would respond through appropriate channels.

‘Not against China curbs’

The letter is a sign of growing pushback against Biden’s semiconductor policy among Democrats from California, home to the US’s top chipmaking equipment companies LAM, Applied Materials and KLA.

LAM Research previously warned it faced a $2.5 billion hit to its revenues from US curbs. In 2023, sales to China comprised 26% of its income, down five percentage points from 2022. The chip equipment maker said US curbs on China exports had “adversely” hit its revenues.

They “could potentially do so to an even greater extent in the future,” it warned.

Similarly, Applied Materials and KLA also estimated a revenue hit upwards of $500 million from the China-aimed curbs. Applied Materials is even facing multiple criminal investigations for secretly sending large cargoes of chipmaking gear to China’s biggest chipmaker SMIC, despite Washington’s curbs.

But the Californian lawmakers argued they were not asking Biden to roll back restrictions on China. They simply opposed the imposition of rules “with questionable national-security benefits” when allies do not follow suit.

“We urge you to use all forms of leverage available to the US government to bring our allies along in aligning their export controls with ours,” they wrote.

• Reuters, with additional inputs from Vishakha Saxena

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