What are the restrictions?
Broadly speaking, the policy restricts the sale of GPUs and related technology to Chinese companies. The specifics remain unclear because (a) the Department of Commerce hasn't released its official press report yet and (b) licenses to sell compute to Chinese companies will be approved on a case-by-case basis.
Here's the NYTimes description of the restrictions:
Companies will no longer be allowed to supply advanced computing chips, chip-making equipment and other products to China unless they receive a special license. Most of those licenses will be denied, though certain shipments to facilities operated by U.S. companies or allied countries will be evaluated on a case-by-case basis, a senior administration official said in a briefing Thursday.
The restrictions limit U.S. exports of the cutting-edge chips called graphic processing units that are used to power artificial intelligence applications, and place broad limits on chips destined for supercomputers in China. The rules also ban U.S.-based companies that make the equipment used to manufacture advanced logic and memory chips from selling that machinery to China without a license.Perhaps most significantly, the Biden administration also imposed broad international restrictions that will prohibit companies anywhere in the world from selling chips used in artificial intelligence and supercomputing in China, if they are made with U.S. technology, software or machinery. The restrictions used what is know as the foreign direct product rule, which was last utilized by former President Donald J. Trump to cripple Huawei.
Another foreign direct product rule bans a broader range of products made outside the United States with American technology from being sent to 28 Chinese companies that have been placed on an “entity list” over national security concerns.
Those companies include Beijing Sensetime Technology Development Co, a unit of major Chinese artificial intelligence company, SenseTime. Also included are Dahua Technology, Higon, IFLYTEK, Megvii Technology, Sugon, Tianjian Phytium Information Technology, Sunway Microelectronics and Yitu Technologies, as well as a variety of labs and research institutions linked to universities and the Chinese government.
The rules also restrict U.S. citizens from helping to develop the Chinese semiconductor industry to advanced levels. Earlier on Friday, the administration announced that it was adding another 31 Chinese companies and institutions to an “unverified list” that limits their ability to obtain a smaller set of certain regulated U.S. items. Among them is Yangtze Memory Technologies Co., Ltd, a major memory chip maker from which Apple has considered sourcing some products.
In a briefing with reporters, senior administration officials said the measures would be limited to the most advanced chips, and thus would not have a broad commercial impact on private Chinese businesses. But they conceded that they could become more restrictive over time, given that technology will begin to outpace them.
Licenses to continue sales to China will be approved on a case-by-case basis by the Department of Commerce. Standards for these licenses will therefore be an ongoing battleground where this policy can become more or less strict. NYTimes:
Some Republican lawmakers and China hawks have criticized the department for being too willing to issue such licenses, allowing U.S. companies to continue selling sensitive technology to China even when national security may be at stake.
“If you want to stop it, you can just stop it,” said Derek Scissors, a senior fellow at the American Enterprise Institute. “When you create a licensing requirement, you are announcing to the world we don’t want to stop it. We are just pretending.”
The waivers to continue selling products to China could come under more scrutiny if Republicans regain the majority in the House after midterm elections.
Representative Michael McCaul, Republican of Texas, said he intended to use his authority as current ranking member of the House Foreign Affairs Committee to press the Bureau of Industry and Security, which reviews such licenses, on the applications and decisions.
Policy Environment
The US has taken complementary policy actions recently, including banning NVIDIA from selling A100s and H100s to Chinese companies and blacklisting 13 more Chinese companies from receiving any investment by Americans.
Taiwan seems to be on-board with the plan, promising "very firm" export controls on Taiwanese chips being sold to the Chinese military complex. Taiwan is a crucial player in this battle, home to Taiwan Semiconductor Manufacturing which produces 53% of the world's outsourced chips and all of NVIDIA's GPUs.
The most important background is the CHIPS Act passed this August providing $52B for US chip manufacturing. Here's a Wikipedia summary of the spending:
The CHIPS Act includes $39 billion in tax benefits and other incentives to encourage American companies to build new chip manufacturing plants in the U.S.[7] Additionally, $11 billion would go toward advanced semiconductor research and development, with $8.5 billion going to the National Institute for Standards and Technology, $500 million for Manufacturing USA, and $2 billion for a new public research hub called the National Semiconductor Technology Center. $24 billion would go to a new 25 percent advanced semiconductor manufacturing tax credit to encourage firms to stay in the United States, and $200 million would go to the National Science Foundation to resolve short-term labor supply issues.
How will China respond?
Unclear. NYTimes is maximally vague:
It remains to be seen whether the Chinese government will take action in response. Samm Sacks, a senior fellow at Yale Law School who studies technology policy in China, said the new rules could push Beijing to impose restrictions on American companies or firms from other countries that comply with U.S. rules but still want to maintain operations in China.
“The question is: Would this new package cross a red line to trigger a response that we haven’t seen before?” she said. “A lot of people are anticipating it will. I think we’ll have to wait and see.”
While the US is dependent on China for many imports, we do not seem to critically depend on their GPUs. (I don't have strong proof of this claim and would welcome disagreement. My understanding is that most US GPUs are designed in the US and manufactured in Asia outside China using machinery developed in the Netherlands and elsewhere around the world. See here.)
China might respond in turn with similar GPU export controls against the US, but given the limited reach of Chinese compute in the US, I expect the US would welcome those restrictions as they further prevent American dependence on Chinese supply chains. A stronger response could include export controls against the US in other sectors or other actions against US foreign policy interests around the world.

Over the coming years and decades, China could gain more influence over Taiwan, South Korea, Singapore, Japan, and other Asian countries with strong chip manufacturing. This could be a real problem for the US which depends on exports from those countries. But promoting US chip independence by funding domestic manufacturing and cutting ourselves off from global supply chains seems like a good way to counter that threat.
How does this support US strategic goals?
These policies together support independence for the US chip supply chain. This is an important long-term goal for the US given that much of the world's compute is produced in East Asia where China could attempt to restrict our access. It's part of a larger strategy of economic decoupling from China in preparation for another Cold War. (Another policy that would promote US supply chain independence is preventing US companies from using Chinese parts in building chips -- perhaps this is on the agenda, or will be enforced unilaterally by the Chinese government in retaliation to our policies.)
The policies also slow down Chinese AI. Some of the companies that are specifically targeted seem particularly heinous such as SenseTime and Dahua which provide facial recognition software for the concentration camps in Xinjiang, while others are more neutral, such as AMD's partnership with Chinese companies to build CPUs. From a US national security perspective, slowing down Chinese growth in general and military AI growth in particular seem widely accepted as a good strategy. I would expect the same thing from an x-risk perspective, though perhaps decreasing Chinese reliance on US chips only reduces our influence during a future critical time (see Matt Yglesias).
It looks like this was only the start. The news from the past few days is alarming at face value: it sounds like a near total ban on everything, TSMC fabbing only the start (!), now all ASML customer support† is gone (!!) not just EUV machines, on top of which all the American-citizen employees (a nontrivial fraction due to education/birth abroad) have halted work literally overnight (!!!), and overall what sounds like the collapse of Chinese semiconductors amidst a Chinese economy already showing serious signs of distress and little capacity to keep an industry on life-support indefinitely as they scramble to survive - and once they go down in a cascade of bankruptcies/liquidations*, each node killing the nodes dependent on it, and everything is sold off and liquidated and employees scatter to the four winds, rebuilding that semiconductor ecosystem (which has already cost $100b+ and decades to build in repeated efforts) years later, when even further behind, will be more like starting from scratch than turning on an idle car. (And how long might that be, if China is entering its 'lost decades'...?) What's the exit plan here for the US, what does success look like? If there is one thing to learn from past attempts at strategic embargoes like China's failed rare earth embargo or Russia's failed gas extortion, it's that while they can be extremely effective in the short term, they are one-shot weapons which neutralize themselves in the less short run.
Or to put it another way, if the CCP tries to invade Taiwan in the next 10 years, historians are likely going to point to 2-3 days ago as the pivot: it is now a razor blade cutting China's throat if AI and high tech in general is the future, with nothing more to lose and everything to gain from destroying TSMC so no one else can have it either. (Meanwhile, the NYT front page story: "Companies Are Hoarding Workers. That Could Be Good News for the Economy." Glad our media is still doing a bangup job of keeping everything in perspective.)
The implications for AI scaling and timelines are also immense: aside from the obvious disaster for Chinese AI research, which will stagnate at present Chinchilla-level runs, any invasion attempt is tantamount to the destruction of TSMC (you can now be sure some cruise missiles will find their way to TSMC chip fabs conveniently set out as hostages on the western side of Taiwan & most definitely not hardened underground in Taiwan's mountains) and will set back scaling by years, possibly decades given the realities of chip fab, capital investment, globalized supply chains, tacit knowledge, experience curves, and risk premia leading to compounding falling behind exponential projections.
So uh... yikes? Is this really what's happening? Is there some ameliorating factor not covered in any of the reporting so far? We should all probably be paying way more attention to this than Elon Musk's latest bipolar antics, or even Putin's nuclear blackmail, because this appears to actually be happening right now, not merely possibly some day. We appear to live in interesting times.
Links (in no particular order):
https://www.scmp.com/tech/tech-war/article/3195785/tech-war-chinas-top-chip-equipment-maker-removes-us-employees-product (note: semi-independent; I have not seen any party media report on this, which given that we are in the runup to the party congress & Xi's coronation‡ where extreme measures are being imposed & all bad news is verboten, suggests that the CCP regards this as rather bad news not to be mentioned at all, otherwise it would either be denying such hostile rumors or excoriating the USA & Dark Biden; Chinese censorship strategy is to silence & distract, so a total blackout from mainland media, rather than semi-independent HK media, is consistent with this being as apocalyptic as it sounds. EDIT: haven't read any full translations of speeches yesterday, but coverage didn't highlight any specific chip comments, other than generic Xi comments about the many threats to Chinese national security and 'stormy waters' ahead. Still no official CCP or CCP company comment on any of this, apparently, so the total blackout continues.)
https://www.bloomberg.com/news/articles/2022-10-12/asml-orders-us-employees-to-stop-servicing-customers-in-china
https://www.bloomberg.com/news/articles/2022-10-12/us-chip-suppliers-pull-back-from-china-s-yangtze-after-biden-ban
https://twitter.com/jordanschnyc/status/1580889342402129921 https://twitter.com/Scholars_Stage/status/1580950956560199683
https://www.nytimes.com/2022/10/13/us/politics/biden-china-technology-semiconductors.html
https://www.chinatalk.media/p/new-chip-export-controls-explained
https://www.bloomberg.com/news/articles/2022-10-10/china-chip-stocks-drop-as-biden-tightens-rules-on-us-tech-access
https://noahpinion.substack.com/p/biden-declares-economic-war-on-the
"Apple freezes plan to use China's YMTC chips amid political pressure: Company previously planned to put Chinese-made memory in some iPhones" (NYT on how YMTC's Apple deal was a major target of Congress):
Up to half of all iPhone memory worldwide! That was a huge order they lost, literally billions upon billions. And that's just one order. And further, it was the one they were counting on to bankroll their chip fab - like a shark, massive capital investments drawing on a huge international web of dependencies don't do well when suddenly frozen in place...
"Lam Research warns of up to $2.5b revenue hit from U.S. curbs on China exports"
https://www.csis.org/analysis/choking-chinas-access-future-ai
"American technology boosts China’s hypersonic missile program"
"Analysis: China faces its "Sputnik" moment as US export curbs deal a blow to its chip ambitions", Reuters
"China and USA Are Officially At Economic War – Technology Restriction Overview: New regulations will impact global trade by hundreds of billions of dollars annually", Dylan Patel (SemiAnalysis)
"China Summons Chip Firms for Emergency Talks After US Curbs", Bloomberg (emphasis added):
"TSMC Suspends Work for Chinese Chip Startup Amid US Curbs"; "China's Largest GPU Developer Biren Slashes Headcount [by 33%] Due to U.S. Sanctions...as TSMC halts shipments" (particularly striking as this is coming well after the big meeting with the ministry and presumably Biren would know about any planned subsidies/relief, and this is only the start... it seems doubtful there are any competitors who will be hiring them, rather than firing their own, under the circumstances - will there soon be a lot of Shanghai taxi drivers peculiarly knowledgeable about CUDA programming?)
"China's Xi Says Willing to Work With United States for Mutual Benefit"; "Top China Envoy Lashes Out at US Export Curbs in Blinken Call"
"Shares in Chinese Companies Crash After Xi Jinping Stacks Party With Allies" (tech especially)
"TSMC Cuts Down Orders By Up to 50%, Sending Shockwaves Says Report"
"US Ban on Americans Aiding China Chip Firms Narrower Than Feared"
"Will Sanctions Against Russia End the War in Ukraine? D.C. bureaucrats have worked stealthily with allies to open a financial front against Putin." (not directly China-related but contains several examples of how chip sanctions gradually bite over time: it doesn't make headlines, factories just go idle and then quietly shut down)
"Observers: China’s Chip Talent Hurdle Worsens After Layoffs at US Firm Marvell"
"US-China Chip War with the Chip Avengers: "It takes a thousand steps to make a semiconductor and you're going to have to get them all right."", Jordan Schneider & Irene Zhang (Schneider denies that the party congress timing was deliberate, incidentally; YMMV on whether that makes the 'giant middle finger to the Congress' better or worse.)
"AliBaba Chinese 128-Core CPU World Record Expelled From Rankings: No Availability; Biden's sanctions work?"
"Tech war: Nvidia offers new GPU chip ['A800'] tailored for Chinese market as it vows to comply with US export regulations" (Reuters; gimped to 400GB/s interconnect, below the A100 600GB/s)
"US seeks to pressure allies' chip gear makers to join export control"
"Chinese chip designers [AliBaba & Biren] slow down processors to dodge US sanctions" (specifically, gimping interconnect in the hopes that TSMC will agree to fab them)
"TSMC 7nm process capacity utilization falling rapidly"
"China’s top chip maker SMIC warns on negative impact from US export controls after posting flat third-quarter revenue"
"China’s chip executives brace for winter as US sanctions push country’s semiconductor industry to the brink of desperation", SMCP (notable points: unusually strong language in the title; VC investment has halted; orders have fallen substantially, such as -20%; chip business failures already exceed 2021's total; SMIC has halved investments; one VC thinks startups will need at least 18 months of cashflow in the bank to survive; there's some hype/happy-talk about how maybe they can just pivot to photonics out of semiconductor entirely; and there is zero discussion of CCP government bailout/support.)
"A Dangerous Game Over Taiwan"
"Engineers From Taiwan Bolstered China’s Chip Industry. Now They’re Leaving."
"US bans may not be loosened for next 5 years, which benefits Korean memory brands, says Silicon Motion"
See also: for historical background on China's previous failed efforts to create a autarkic domestic chip industry, see 'The Sour Past of "China Chips"'
"China’s Silicon Future: China dreams of competing with global superpowers in the semiconductor industry. Whether its efforts will succeed is far from clear.", Karson Elmgren (CSET)
"Beijing allows US export-control checks on Chinese tech companies: Biden administration says China’s commerce ministry has allowed inspections ahead of trade blacklisting deadline" ("Desperate times calls for desperate measures.")
Looks like they're knuckling under.
"Japanese tech leaders warn Beijing will ride out US chip sanctions: Sony and NEC executives say progress may be slowed but China will remain a force in AI and other areas"
"US targets China’s potential chip stars with new restrictions: Companies added to trade blacklist previously flew under the radar":
(BGI Genomics also got blacklisted, not that anyone particularly cares about Chinese genetics at this point.)
* One might think it'd be crazy to try to trigger this sort of systemic crisis in the middle of a global, and Chinese, economic crisis. But of course, like chemotherapy, the question isn't whether it's bad for you, but worse for the other guy, and potentially pushing the chip ecosystem into a systemic collapse will never be easier than it is today. The USA is much wealthier than China, it can handle high-priced chips better.
† Presumably this extends to updates, upgrades, replacement of consumables, repairs when things break, replacement of broken machines... (How's Russian military manufacturing & aviation going these days?)
‡ What an utter insult to Xi Jingping, incidentally. He must be furious to have this drop literally days before. Brother Pooh is not noted for his thick skin. I wouldn't be surprised if whoever is masterminding this in the Biden administration timed it deliberately - after all, given that it's been several weeks since the TSMC GPU embargo was announced, they could easily have delayed it to this week & after.
“China is working on a more than 1 trillion yuan ($143 billion) support package for its semiconductor industry.”
“The majority of the financial assistance would be used to subsidise the purchases of domestic semiconductor equipment by Chinese firms, mainly semiconductor fabrication plants, or fabs, they said.”
“Such companies would be entitled to a 20% subsidy on the cost of purchases, the three sources said.”
https://www.reuters.com/technology/china-plans-over-143-bln-push-boost-domestic-chips-compete-with-us-sources-2022-12-13/
My impression is this is too l... (read more)