The US is said to be tightening its export rules on chipmaking equipment, but will provide exceptions for allied and friendly nations.

An expansion of the Foreign Direct Product Rule (FDPR) will go into effect in August, according to Reuters, citing two anonymous sources. The updated rules will reportedly target chipmaking tools, which presumably include devices like lithography machines.

The FDPR legal framework is intended to give the US government the authority to prevent domestic technology from getting into the hands of certain countries and companies. Tech giant Huawei has been regulated under the FDPR since 2022, and the report claims the update would impose rules on around 120 other Chinese firms, including six fabs.

Additionally, the update is intended to lower the threshold for how much US technology needs to be in a product for it to fall under the FDPR. Apparently, the threshold will be lowered so much that a product with just a single chip made with American tech will be subject to export rules.

However, this more stringent version of the FDPR won't apply to so-called A:5 countries, as defined by the Bureau of Industry and Security. As of March 15, the list [PDF] of A:5 countries includes 37 key US allies and friends, such as Canada, Germany, Japan, and the Netherlands. These countries are exempt from the new export restrictions, unlike countries solely in categories B through E, which include Taiwan and Israel, among others.

The exemption for A:5 countries is critical for businesses like Dutch lithography company ASML, which is the only manufacturer of cutting-edge extreme ultraviolet (EUV) lithography machines, and which pulled in almost half of its Q1 revenue from China. ASML is already subject to existing US restrictions: It isn't allowed to sell its EUV lithography machines to China, nor its older deep ultraviolet (DUV) machines since January.

The US has been able to exert pressure on ASML, and in April got the company to stop servicing chipmaking tools located in China. But an exclusion from the incoming set of rules will be a relief to the lithography specialist.

An update to the FDPR was rumored two weeks ago, but with the assumption that it would affect ASML and other companies like Japan-based Tokyo Electron, causing a stock price dive. However, today's report has resulted in the market boosting ASML's stock price by 7 percent and Tokyo Electron's by 13 percent as of the time of writing, undoing the decline from two weeks prior.

It's unclear how much of an impact the updated FDPR will have on impeding China's chip ambitions, given that nearly a fifth of the world's countries are exempted. It may, however, encourage China and its domestic tech companies to do more business with US-friendly countries, at least when it comes to the things that aren't illegal to export to the Middle Kingdom. ®

https://www.theregister.com//2024/07/31/us_export_rules_chipmaking/