Month: October 2022

China Saturday criticized the latest U.S. decision to tighten export controls that would make it harder for China to obtain and manufacture advanced computing chips, calling it a violation of international economic and trade rules that will “isolate and backfire” on the U.S.

“Out of the need to maintain its sci-tech hegemony, the U.S. abuses export control measures to maliciously block and suppress Chinese companies,” said Foreign Ministry representative Mao Ning.

“It will not only damage the legitimate rights and interests of Chinese companies, but also affect American companies’ interests,” she said.

Mao also said that the U.S. “weaponization and politicization” of science and technology as well as economic and trade issues will not stop China’s progress.

She was speaking after the U.S. on Friday updated export controls that included adding certain advanced, high-performance computing chips and semiconductor manufacturing equipment to its list, as well as new license requirements for items that would be used in a supercomputer or for semiconductor development in China.

The U.S. said that the export controls were added as part of ongoing efforts to protect U.S. national security and foreign policy interests.

U.S.-China relations have deteriorated in recent years over technology and security issues. The U.S. has implemented a raft of measures and restrictions designed to prevent China from obtaining chip technology, while China has earmarked billions for investment into the production of semiconductors.

The tensions have impacted semiconductor companies in the U.S. and globally which either export chips or manufacture chips in China. Semiconductor companies such as Nvidia and AMD have seen a 40% decline in stock price over the past year.

“We understand the goal of ensuring national security and urge the U.S. government to implement the rules in a targeted way—and in collaboration with international partners—to help level the playing field and mitigate unintended harm to U.S. innovation,” the Semiconductor Industry Association, which represents U.S. semiconductor industry, said in a statement.
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U.S. President Joe Biden signed an executive order Friday designed to allay European concerns that U.S. intelligence agencies are illegally spying on them. It promises strengthened safeguards against data collection abuses and creates a forum for legal challenges. 

The order builds on a preliminary agreement Biden announced in March with European Commission President Ursula von der Leyen in a bid to end a yearslong battle over the safety of EU citizens’ data that tech companies store in the U.S. However, the European privacy campaigner who triggered the battle wasn’t satisfied that it resolved core issues and warned of more legal wrangling. 

The reworked Privacy Shield “includes a robust commitment to strengthen the privacy and civil liberties safeguards for signals intelligence, which should ensure the privacy of EU personal data,” Commerce Secretary Gina Raimondo told reporters. 

Means of redress

“It also requires the establishment of a multilayer redress mechanism with independent and binding authority for EU individuals to seek redress if they believe they are unlawfully targeted by U.S. intelligence activities,” she added. 

Washington and Brussels have long been at odds over the friction between the European Union’s stringent data privacy rules and the comparatively lax regime in the U.S., which lacks a federal privacy law. That has created uncertainty for tech giants including Google and Facebook’s parent company Meta, raising the prospect that U.S. tech firms might need to keep European data out of the U.S. 

Industry groups largely welcomed Biden’s order but European consumer rights and privacy campaigners, including activist Max Schrems, whose complaint kicked off the legal battle a decade earlier, were skeptical about whether it goes far enough and could end up in the bloc’s top court again. 

Friday’s order narrows the scope of intelligence gathering — regardless of a target’s nationality — to “validated intelligence priorities,” fortifies the mandate of the Civil Liberties Protection Officer in the Office of the Director of National Intelligence and directs the attorney general to establish an independent court to review related activities. 

Europeans can petition that Data Protection Review Court, which is to be composed of judges appointed from outside the U.S. government. 

The next step: Raimondo’s office was to send a series of letters to the 27-member EU that its officials can assess as the basis of a new framework. 

Improvements acknowledged

The European Union’s executive arm, the European Commission, said the framework has “significant improvements” over the original Privacy Shield and it would now work on adopting a final decision clearing the way for data to flow freely between EU and U.S. companies certified under the framework. 

Raimondo said the new commitments would address European Union legal concerns covering personal data transfers to the U.S. as well as corporate contracts. A revived framework “will enable the continued flow of data that underpins more than $1 trillion in cross-border trade and investment every year,” Raimondo said. 

Twice, in 2015 and again in 2020, the European Union’s top court struck down data privacy framework agreements between Washington and Brussels. The first legal challenge was filed by Austrian lawyer and privacy activist Schrems, who was concerned about how Facebook handled his data in light of 2013 revelations about U.S. government cyber-snooping from former U.S. National Security Agency contractor Edward Snowden. 

European consumer group BEUC said despite the extra safeguards, fundamental differences between American and European privacy and data protection standards are too wide to bridge. 

“However much the U.S. authorities try to paper over the cracks of the original Privacy Shield, the reality is that the EU and U.S. still have a different approach to data protection, which cannot be canceled out by an executive order,” said the group’s deputy director general, Ursula Pachl. “The moment EU citizens’ data travels across the Atlantic, it will not be afforded similar protections as in the EU.” 

Schrems said while his Vienna-based group, NOYB, would need time to study the order, his initial reading is that it “seems to fail” on some key requirements, including for surveillance to be necessary and proportionate under the EU’s Charter of Fundamental rights to avoid indiscriminate mass data collection. 

While the U.S. included those two words, Schrems said the two sides don’t seem to have agreed they have the same legal meaning. 

If it did, “the U.S. would have to fundamentally limit its mass surveillance systems to comply with the EU understanding of ‘proportionate’ surveillance,” Schrems said. 
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The Biden administration on Friday published a sweeping set of export controls, including a measure to cut China off from certain semiconductor chips made anywhere in the world with U.S. tools, vastly expanding its reach in its bid to slow Beijing’s technological and military advances. 

The rules, some of which go into effect immediately, build on restrictions sent in letters earlier this year to top toolmakers KLA Corp., Lam Research Corp. and Applied Materials Inc., effectively requiring them to halt shipments of equipment to wholly Chinese-owned factories producing advanced logic chips. 

The raft of measures could amount to the biggest shift in U.S. policy toward shipping technology to China since the 1990s.  

If effective, they could set China’s chip manufacturing industry back years by forcing American and foreign companies that use U.S. technology to cut off support for some of China’s leading factories and chip designers.

Cooperation needed 

In a briefing with reporters on Thursday previewing the rules, senior government officials said many of the measures sought to prevent foreign firms from selling advanced chips to China or supplying Chinese firms with tools to make their own advanced chips. They conceded, however, that they have not yet secured any promises that allied nations will implement similar measures and that discussions with those nations are ongoing. 

“We recognize that the unilateral controls we’re putting into place will lose effectiveness over time if other countries don’t join us,” one official said. “And we risk harming U.S. technology leadership if foreign competitors are not subject to similar controls.” 

The expansion of U.S. powers to control exports to China of chips made with U.S. tools is based on a broadening of the so-called foreign direct product rule. It was previously expanded to give the U.S. government authority to control exports of chips made overseas to Chinese telecom giant Huawei Technologies Co. Ltd. and later to stop the flow of semiconductors to Russia after its invasion of Ukraine. 

On Friday, the Biden administration applied the expanded restrictions to China’s IFLYTEK, Dahua Technology and Megvii Technology, companies added to the entity list in 2019 over allegations they aided Beijing in the suppression of its Uyghur minority group. 

The rules published on Friday also block shipments of a broad array of chips for use in Chinese supercomputing systems.  

The rules define a supercomputer as any system with more than 100 petaflops of computing power within a floor space of 6,400 square feet, a definition that two industry sources said could also hit some commercial data centers at Chinese tech giants. 

U.S. Senate Democratic leader Chuck Schumer welcomed the announcement, arguing the rules would “protect our country’s innovations from China’s predatory actions.” 

The Semiconductor Industry Association, which represents chipmakers, said it was studying the regulations and urged the United States to “implement the rules in a targeted way – and in collaboration with international partners – to help level the playing field.” 

‘Unverified list’

Earlier on Friday, the United States added China’s top memory chipmaker YMTC and 30 other Chinese entities to a list of companies that U.S. officials cannot inspect, ratcheting up tensions with Beijing and taking aim at a firm that has long troubled the Biden administration. 

The “unverified list” is a potential precursor to tougher economic blacklists, but companies that comply with U.S. inspection rules can come off the list. On Friday, U.S. officials removed nine such firms, including a unit of China’s Wuxi Biologics, which makes ingredients for AstraZeneca Plc’s COVID-19 vaccine. 

The new regulations will also severely restrict export of U.S. equipment to Chinese memory chip makers and formalize letters sent to Nvidia Corp. and Advanced Micro Devices Inc. restricting shipments to China of chips used in supercomputing systems that nations around the world rely on to develop nuclear weapons and other military technologies. 

Reuters was first to report key details of the new restrictions on memory chip makers, including a reprieve for foreign companies operating in China and the moves to broaden restrictions on shipments to China of technologies from KLA, Lam, Applied Materials Nvidia and AMD.
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