The issuance of transaction licenses to U.S. corporations for China’s Huawei and SMIC, which are on the U.S. blacklist, has been suspended and will not be resumed.
The Trump administration has formalized tough measures to curb China's semiconductor ambitions. Jeffrey Kessler, Vice Minister of the U.S. Department of Commerce, stated during a congressional hearing on the 12th (local time) that, under the export control program, Huawei will only be able to produce fewer than 200,000 AI chips known as 'Ascend' this year. This level does not even reach the approximately 500,000 AI chips needed for the single project 'Stargate' data center being developed by OpenAI in Texas.
Vice Minister Kessler's remarks effectively overturn the policies of the previous Biden administration. While the Biden administration placed Huawei and China's largest foundry, SMIC, on the blacklist, it had been issuing special licenses allowing U.S. corporations like Intel and Qualcomm to export billions of dollars worth of system semiconductors. The measures that block this are intended to completely close any loopholes and slow down the pace of China's technological pursuit.
Vice Minister Kessler countered claims made earlier by Jensen Huang, CEO of NVIDIA, who said there was no evidence that AI chips were being useful for China, stating, 'It is a clear fact that U.S. AI chips are being smuggled into China.' He also strongly requested Congress to increase the budget for enhancing enforcement powers, including significantly increasing the personnel of the Bureau of Industry and Security (BIS) to stop such illegal distribution.
The U.S. issued warnings about the potential for technology leaks through its allies as well. Vice Minister Kessler mentioned that they will consider the Foreign Direct Product Rule (FDPR) to prevent companies like the Dutch ASML and Japan's Tokyo Electron, which dominate the global semiconductor market, from circumventing U.S. controls by repairing and supplying semiconductor equipment to China, a practice known as 'backfilling.' FDPR is a strong extraterritorial regulation that mandates U.S. government export licenses for overseas products if they include U.S. technology. The Biden administration refrained from using this card due to concerns about friction with allies, but the Trump administration indicated it could activate it at any time.
At the hearing, Vice Minister Kessler reiterated warnings that China's technological prowess is rapidly catching up with the U.S. He said, 'China is making massive investments to enhance the production capacity and performance of AI chips,' adding, 'It is important to understand that China is rapidly catching up from a security perspective.' He emphasized that 'Given China’s global ambitions, it is unwise to assume that current production levels being low provide a sense of security.' Earlier, the White House stated on the 10th that 'China is lagging 3 to 6 months behind the U.S. in AI technology.'
In this situation, industry assessments are emerging that the U.S.'s comprehensive pressure is paradoxically accelerating China's technological self-sufficiency. CEO Jensen Huang stated, 'Due to export regulations, Chinese corporations have started developing their own AI hardware, resulting in a counterproductive outcome to U.S. objectives.' Former CEO of ASML, Peter Wennink, also noted, 'Pressuring China through export controls will ultimately lead them to become more innovative, such as developing their own equipment.' He stressed that 'Whether it takes time or not, they will eventually reach their own technological goals.' In fact, China is expanding its investments across AI chips, semiconductor equipment, and design fields, and it is reported that after mass production of 5 to 7-nanometer chips, it is preparing to mass-produce 3-nanometer chips next year.