The Biden administration is set to announce new, targeted restrictions on China's semiconductor industry, focusing primarily on emerging chip manufacturing equipment companies rather than broad industry-wide limitations. According to Bloomberg, these new restrictions are supposed to take effect on Monday. The new rules will specifically target two manufacturing facilities owned by Semiconductor Manufacturing International Corp. (SMIC) and will add select companies to the US Entity List, restricting their access to American technology. However, most of Huawei's suppliers can continue their operations, suggesting a more mild strategy. The restrictions will focus on over 100 emerging Chinese semiconductor equipment manufacturers, many of which receive government funding. These companies are developing tools intended to replace those currently supplied by industry leaders such as ASML, Applied Materials, and Tokyo Electron.

The moderated approach comes after significant lobbying efforts from American semiconductor companies, who argued that stricter restrictions could disadvantage them against international competitors. Major firms like Applied Materials, KLA, and Lam Research voiced concerns about losing market share to companies in Japan and the Netherlands, where similar but less stringent export controls are in place. Notably, Japanese companies like SUMCO are already seeing the revenue impacts of Chinese independence. Lastly, the restrictions will have a limited effect on China's memory chip sector. The new measures will not directly affect ChangXin Memory Technologies (CXMT), a significant Chinese DRAM manufacturer capable of producing high-bandwidth memory for AI applications.

In a bold move to circumvent US sanctions imposed on Chinese chipmakers, ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies (YMTC), leading Chinese suppliers of DRAM and NAND flash memory respectively, are pursuing distinct strategies to accelerate development despite US export restrictions. Sources at DigiTimes indicate that CXMT has commenced mass production of 18.5 nm process DRAM chips at its new plant in Hefei. By slightly exceeding the US limit of 18 nm, CXMT aims to increase capacity while technically complying with Commerce Department rules. The phase-one Hefei plant is nearly at full utilization, with monthly output reaching 100,000 wafers. The upcoming phase-two expansion, adding 40,000 monthly wafers by the end of 2024, could give CXMT 10% of total DRAM capacity at global scale. Moreover, CXMT plans to increase domestic sourcing for the new expansion significantly.

In contrast, YMTC's capacity growth faces constraints across the board after being added to the US Entity List. With imports of key equipment now halted, building up local supply chains for materials and tools has proven challenging. Despite R&D advances, including NAND flash with over 300 layers, YMTC has introduced new 120-layer products that intentionally fall under the US limit of 128. However, even these compliant chips await US approval for higher production. Looking ahead, while CXMT has carved a viable path around US restrictions, YMTC's capacity plans face ongoing obstacles. Still, through determined R&D efforts, including 232-layer and future 300+ layer NAND, YMTC aims to push China's semiconductor capabilities forward despite external headwinds.