Multilateral export controls are created by groups of states to informally govern the exports of certain technologies for mutual benefit. Existing allies are, however, becoming increasingly misaligned, especially when it comes to China’s semiconductor industry. In response to increasing strategic competition between the US and China, the US Department of Commerce’s Bureau of Industry and Security (BIS) recently announced new export control regulations aimed at restricting China’s ability to obtain, design, and manufacture certain high-end semiconductor devices used in AI, supercomputing, and related defense applications. This marks a significant shift in US policy, which had previously allowed a more free-flowing approach to trade. New rules prohibit companies from exporting semiconductor manufacturing equipment that might allow Chinese companies to produce advanced semiconductors smaller than 14 nanometers in size. The BIS has more in mind: It intends to propose that companies create their own export controls for semiconductor equipment, materials, and chips in order to take a unified stance against the PRC. Multilateral export control policy could backfire. If China’s ability to produce the chips required our modern technology, the global supply chain could be disrupted. Countries including Japan and Korea might adopt a so called “design-out” option, that would steer clear of US policy restrictions by instead using equivalent technology developed in other countries. If the US isn’t able to win allies, these new export controls could make businesses vulnerable while helping Chinese-developed chips and manufacturers to thrive.
Multilateral export controls