America’s Commercial Sanctions on China Could Get Much Worse

Such advances may prompt America to modify its sanctions on chips, says Bill Drexel of the Centre for a New American Security (CNAS), a think-tank in Washington. It might choose to focus purely on the computational power of chips. This is a simpler approach than trying to find a “sweet spot between computing power and interconnect bandwidth”, says Mr Drexel. But it would entail broadening the restrictions to less powerful chips. That could ensnare the graphics-processing units used in the video-games industry, a rapidly growing market worth $40bn last year. Both American chipmakers and their Chinese customers would suffer.

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After the announcement American officials did elicit reluctant agreement from the Dutch and Japanese governments to adopt similar measures, even though they will be painful for ASML, a Dutch manufacturer of chipmaking equipment, and several big Japanese firms. South Korean firms have been granted a one-year reprieve but will eventually have to comply, according to reports. South Korea exports about half of its memory chips to China, notes Sam Howell at CNAS. Samsung and SK Hynix, two big South Korean chipmakers, have invested billions of dollars in manufacturing facilities in China. They risk penalties from America if they do not fall into line, and from China if they do. America’s vast sanctions programme faces many such hurdles, Ms Howell notes.

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