Tag: semiconductors

FY 2023 NDAA Muddies the Water on Whether Chinese Semiconductor Ban Will Apply to Contractors

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Robyn N. Burrows ●

Last month, we wrote about a proposed amendment to the FY 2023 National Defense Authorization Act (“NDAA”) that would prohibit contractors from selling certain Chinese semiconductor technologies to federal agencies and from using these same covered products and services. This measure was added through Section 5949 of the NDAA.

On December 6, the House passed a compromise version of the NDAA, which appears to scale back the semiconductor ban by applying it only to federal sales of covered products and services, without also banning contractors from using them. However, the explanatory statement accompanying the NDAA suggests contractors (including their affiliates and subsidiaries) may ultimately be prohibited from using covered semiconductor technologies—which would raise a host of compliance and implementation concerns.

Compromise Version of NDAA Limits Semiconductor Ban to Federal Sales

Section 5949 bans semiconductor products and services from Semiconductor Manufacturing International Corporation, ChangXin Memory Technologies, and Yangtze Memory Technologies Corp., plus their subsidiaries and affiliates. This ban was modeled after the supply chain restrictions from Section 889, which prohibit contractors from selling and using covered telecommunications and video surveillance equipment from five Chinese telecom companies.

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Senate Majority Leader Schumer Proposes Section 889 Expansion

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Robyn N. Burrows and Merle M. DeLancey, Jr. ●

On October 18, 2022, Senate Majority Leader Chuck Schumer (D-NY) issued a press release signaling a potentially significant expansion of Section 889 through a proposed amendment to the 2023 National Defense Authorization Act (“NDAA”). Schumer’s proposal is aimed at extending the telecommunications supply chain prohibitions in Section 889 to the semiconductor manufacturing industry.

Section 889 currently prohibits contractors from providing the federal government or using any products or services that incorporate “covered telecommunications equipment or services” from five Chinese telecom companies and their affiliates and subsidiaries: (1) Huawei Technologies Company, (2) ZTE Corporation, (3) Hytera Communications Corporation, (4) Hangzhou Hikvision Digital Technology Company, and (5) Dahua Technology Company.

Schumer’s 2023 NDAA amendment would expand Section 889 by banning semiconductor products like microchips from the following three Chinese entities: (1) Semiconductor Manufacturing International Corporation (“SMIC”), (2) ChangXin Memory Technologies (“CXMT”), and (3) Yangtze Memory Technologies Corp. (“YMTC”). Schumer noted that these companies have known links to the Chinese state security and intelligence apparatuses. The amendment is aimed at filling a gap in federal procurement restrictions that currently do not include semiconductor technology and services, creating a vulnerability for cyberattacks and data privacy. The amendment would not take effect until three years after the NDAA’s enactment, or until 2025.

Although we do not yet know whether Schumer’s amendment will be incorporated into the final NDAA bill, contractors should nevertheless begin evaluating their supply chains to identify any semiconductor products from any of the three named Chinese manufacturers. Schumer’s amendment signals a continually expansive interpretation and enforcement of Section 889, which may be reflected in the final rulemaking for Section 889. The current FAR docket anticipates a final rule in December 2022, although these deadlines continue to be moving targets.

New Semiconductor Export Controls: Executive Briefing

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Anthony Rapa ●

On October 7, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) issued sweeping new export controls under the Export Administration Regulations (“EAR”) aiming to cut off support for China’s advanced computing and supercomputing capabilities, with the new controls targeting specified chips, chipmaking equipment, and related services.

The BIS rule, which runs over 100 pages, is the most significant expansion of semiconductor-related export controls in recent memory, if not the history of the EAR, and marks a decisive inflection point in the U.S. strategic competition with China. Companies in the semiconductor industry should gauge their exposure to China-related risk, which could be present in oblique and non-obvious ways, and service providers to the industry should assess their risk exposure in light of the rule’s provisions regarding U.S. person “support” for restricted activities.

Continue reading “New Semiconductor Export Controls: Executive Briefing“

Westlaw Today: U.S. Commerce Department Issues Semiconductor-Related Export Controls

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Westlaw Today, October 7, 2022

Anthony Rapa and Matthew J. Thomas ●

On August 15, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued an interim final rule imposing new export controls relating to certain semiconductor technology.

Specifically, the rule establishes a requirement under the Export Administration Regulations (EAR) to obtain a license from BIS before exporting to certain destinations the following materials and technologies:

      • Substrates of gallium oxide and diamond (ultra-wide bandgap semiconductors); and
      • Electronic Computer Aided Design (ECAD) software for the development of integrated circuits with Gate All-Around Field Effect Transistor (GAAFET) structures.

The control for the specified substrates is effective Aug. 15, 2022, while the control for the ECAD/GAAFET software is effective Oct. 14, 2022, with a comment period for industry that ran through Sept. 14, 2022.

The rulemaking follows public reports in July 2022 indicating that BIS had sent letters to chipmaking equipment manufacturers directing them not to export to China equipment capable of fabricating chips at 14 nanometers and below.

You can read more on our website.

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