US Firms Pull Staff From China’s Top Chip Maker As Economic War Worsens

The Biden administration’s new technology restrictions are already causing disruptions in China as US semiconductor equipment suppliers are telling staff based in the country’s top memory chip maker to leave, according to WSJ, citing sources familiar with the matter. 

State-owned Yangtze Memory Technologies Co. has seen US chip semiconductor equipment companies, including KLA Corp. and Lam Research Corp., halt business activities at the facility. This includes installing new equipment to make advanced chips and overseeing highly technical chip production. 

The US suppliers have paused support of already installed equipment at YMTC in recent days and temporarily halted installation of new tools, the people said. The suppliers are also temporarily pulling out their staff based at YMTC, the people said. –WSJ 

As noted earlier this week, the US Commerce Department last Friday unveiled sweeping new regulations that limit the sale of semiconductors and chip-making equipment to Chinese customers, striking at the foundation of the country’s efforts to advance its own chip industry. The agency also added 31 organizations to its unverified list, including Yangtze Memory. 

The move is the Biden admin’s most aggressive yet as it tries to stop China from developing technological capabilities it sees as a threat. 

Bloomberg noted that Washington’s bold moves against China could extend well beyond semiconductors and into industries that rely on high-end chips, from electric vehicles and aerospace to simple gadgets like smartphones.

The two countries are now officially in an “economic war,” Dylan Patel, chief analyst at SemiAnalysis, said. A Chinese analyst said there is “no possibility of reconciliation” any longer.

KLA and Lam are vital to Yangtze Memory’s daily operations, and if the halt of US expertise to highly technical chip production tools is extended for a long enough time, this could produce supply disruptions and or the inability to develop new chips. 

Chinese state media and officials raged against Biden’s sweeping new regulations last weekend, warning of economic consequences and stirring speculation about potential retaliation. We suspect a comment from Beijing is imminent, as well as retaliation.