The semiconductor industry has become a central front in the geopolitical competition between the US and China. Export control regulations β specifically the US Bureau of Industry and Security (BIS) rules on advanced chips and chipmaking equipment β have expanded significantly over the past three years, and more restrictions are expected. For supply chain professionals, understanding these rules is no longer optional; non-compliance carries criminal penalties and reputational damage that can destroy a business.
What’s Currently Restricted
The most significant US export controls restrict the sale of advanced computing chips (broadly, those meeting certain performance thresholds in parameters like TOPS, memory bandwidth, and interconnect bandwidth), advanced semiconductor manufacturing equipment, and EDA software tools to China and a list of other countries of concern. The October 2023 expansion significantly tightened these rules, closing loopholes that had allowed sophisticated chips like NVIDIA’s A800 and H800 to be sold as “de-restricted” variants.
ASML’s extreme ultraviolet (EUV) lithography machines were already restricted from export to China. Subsequent rules extended restrictions to certain DUV (deep ultraviolet) tools β older technology that China had been using to advance its domestic chip manufacturing. Japan and the Netherlands implemented their own parallel restrictions, creating a multilateral export control regime for the most advanced chipmaking equipment.
Who Needs to Pay Attention
If your company sells semiconductors, electronic components, or manufacturing equipment, you need to assess your exposure. The rules apply not just to direct US exports but to re-exports from third countries if the goods contain US-origin technology above certain de minimis thresholds β a rule with significant implications for distributors and value-added resellers operating internationally.
The “red flags” doctrine under US export law creates an obligation to investigate and refrain from proceeding if there are signals that end-use or end-user might be problematic β even if you don’t have definitive proof of a violation. This puts due diligence requirements on companies throughout the distribution chain, not just direct exporters.
Practical Compliance Steps
Companies without a formal export compliance program should implement one immediately. At minimum this includes: screening customers and transactions against the BIS Entity List, Denied Persons List, and OFAC SDN List; implementing Export Control Classification Number (ECCN) classification for all products; training sales and operations teams on red flag recognition; and documenting due diligence for sensitive transactions.
For distributors sourcing from multiple geographies, know your supply chain. “Country of origin” rules for export control purposes can be complex for assembled electronic products β if US-origin ICs are incorporated into boards assembled in Malaysia and then exported, the US-origin content may still be subject to US export rules.
The China Supply Chain Question
Many multinational companies are facing strategic questions about their China supply chain exposure β both as a source of components and as a market for products. The regulatory environment makes a case for supply chain diversification that goes beyond traditional cost and lead time considerations. Vietnam, India, Malaysia, and Mexico are all receiving increased investment from companies seeking to reduce China concentration.
Vyrian works with legal counsel and compliance experts to ensure our platform and supplier network operate within applicable export control regulations. If you have compliance questions specific to your transaction, consult qualified export control legal counsel.