The New Chip Controls: How Washington’s Rules Are Reshaping Global Tech

What Has the United States Done?

The United States introduced new export controls requiring American chip makers to obtain licences before exporting advanced semiconductors or chip‑making equipment to China. The rules also allow the United States to block foreign‑made chips if they were produced using American technology.

These measures expand the Foreign Direct Product Rule under the Export Administration Regulations. This rule extends US export controls to goods produced abroad using US technology. It has previously been used to restrict exports to Huawei Technologies and to cut off chip supplies to Russia after it invaded Ukraine.

The United States also added 31 Chinese companies to its “unverified list”, meaning it has not yet confirmed that American technology supplied to them is being used for legitimate purposes. Companies placed on the list have 60 days to provide satisfactory evidence. If they fail, US suppliers will be barred from providing them with technology.

Impact on the Chip Market

The effect of these controls depends on how aggressively US regulators enforce them. Even so, companies seeking to avoid investigations or trade restrictions will likely comply.

1. Pressure on Chinese chip manufacturers

Reduced access to manufacturing equipment will immediately affect production capacity. Maintenance and replacement of machinery will become difficult. Lower output may force Chinese manufacturers to reduce headcount, sell non‑core assets or shrink their real estate footprint.

2. Declining sales for US chip companies

Many American chip and equipment manufacturers rely heavily on China. According to the Financial Times, China accounts for:

• 33% of sales at Applied Materials
• 27% at Intel
• 31% at Lam Research

Restrictions will reduce revenue for these companies. In contrast, manufacturers in South Korea and Taiwan may gain market share. Growth in these jurisdictions will generate work for corporate, real estate and capital markets teams.

3. Effects on Asia‑Pacific chip makers

Some Asia‑Pacific companies operate factories in China or supply Chinese entities, meaning they fall within the controls. SK Hynix and Taiwan Semiconductor Manufacturing Company have received one‑year exemptions. If they cannot secure extensions, they may need to relocate production to other Asia‑Pacific jurisdictions.

For example, IBM is partnering with Rapidus, a Japanese chip manufacturer, to develop advanced technology and establish a research centre. Such moves require real estate lawyers for new sites, trade lawyers for new routes and employment lawyers for workforce restructuring.

4. China’s push for domestic chip production

In the medium term, China may accelerate development of its domestic semiconductor industry. This will generate work for corporate teams advising on new entities, real estate and project finance teams supporting new facilities, and funds teams assisting investors seeking opportunities in start‑ups.

Protectionism and the Risk of Retaliation

The United States is not alone in restricting Chinese access to technology. Germany recently blocked the sale of Elmos Semiconductor’s Dortmund factory to Silex, a Swedish subsidiary of China’s Sai Microelectronics. Canada has forced three Chinese firms to divest their holdings in lithium mining companies.

China may consider several responses.

1. Targeting US companies with major Chinese exposure

Some analysts suggest China could target companies such as Apple, which manufactures most of its products in China. However, Apple’s presence supports a large workforce. Any retaliation could harm China’s own economy, which is already under strain.

2. Blocking deals involving US bidders

China may follow Germany and Canada by refusing approval for transactions involving American buyers. This could reduce deal flow in the region and force law firms to reconsider the viability of corporate‑focused offices in China.

3. Imposing export controls on its own dominant industries

China could restrict exports of commodities such as lithium, nickel and cobalt, or chemicals used in industrial and pharmaceutical processes. China ranks third in global lithium production and supplies 68% of India’s pharmaceutical ingredients.

However, many countries are already attempting to reduce reliance on Chinese supply chains. Any restrictions may accelerate onshoring in targeted countries and harm Chinese companies more than their competitors.

Conclusion

The enforcement of these trade restrictions will shape the semiconductor landscape in three key ways.

1. Restructuring Asia‑Pacific chip manufacturing

Companies may relocate production, alter supply chains and adjust business structures across the region.

2. Accelerating China’s domestic chip industry

China may invest heavily in homegrown technology to reduce reliance on US equipment.

3. Intensifying US‑China trade tensions

Retaliation from China could reignite the trade war and reshape global supply chains.

For lawyers, these developments raise important questions. Case studies may ask how clients should structure supply chains in light of trade regulations. Law firms may need to adapt their global structures to remain competitive in an era of rising protectionism.