On October 17, 2023, the US Department of Commerce’s Bureau of Industry and Security (the “BIS”) announced amendments to the Export Administration Regulations (the “EAR”) that expand and strengthen measures for export control targeted at the People’s Republic of China (the “PRC”). The amendments (i) broaden the scope of semiconductors and related manufacturing equipment subject to export controls, (ii) aim to mitigate the risks of circumvention, and (iii) generally seek to further tighten export restrictions imposed on the PRC.

According to the EAR, technologies or items that have been lawfully exported from the US may still fall under US export control regulations if they are re-exported. This means that even products manufactured in Korea may be subject to such regulations, especially if they have been developed or manufactured using US technology, software or equipment, or incorporate a certain portion of US controlled parts. Therefore, companies are strongly advised to keep abreast of developments in both US control regulations and Korean export rules when exporting or re-exporting products from Korea.

On October 7, 2022, the BIS implemented measures to tighten export controls on the PRC, particularly concerning semiconductors and related manufacturing equipment. As a result, certain semiconductor products (e.g., advanced computing chips and supercomputer components) as well as semiconductor manufacturing equipment and related software and technology were added to the list of controlled items, effectively prohibiting their export to the PRC without a license from the US Department of Commerce. In addition, any exports to the PRC-based companies that appear on the list of entities of concern (the “Entity List”) are also subject to export controls.

The recent EAR amendments (the “Amendments”) build on and further strengthen last year’s export restrictions. Taking effect on November 17, 2023, the Amendments are designed to prevent the PRC from acquiring advanced computing semiconductors needed for the development and production of military artificial intelligence technologies. The Amendments also aim to block the PRC’s access to the manufacturing equipment required to produce advanced integrated circuits, which are crucial for next-generation advanced weapon systems.

The highlights of the Amendments are as follows:
 

The ECCN 3A090.a has been revised to address the circumvention of prior control standards. Under last year’s amendments, AI chips were subject to control when both “total computational performance” and “interconnection speed” thresholds were met. The Amendments removed the “interconnection speed” criterion and added a “performance density” threshold, thereby expanding the scope of AI chips subject to export controls.

As several semiconductor companies have been producing and selling lower-performance AI chips to the PRC to skirt last year’s threshold parameters, a new control standard (i.e., ECCN 3A090.b) has been issued. Under the new standard, even AI processors that fall below the performance threshold are regulated if they are deemed to endanger national security. Consequently, NVIDIA, a US semiconductor manufacturer, is anticipated to be impacted. Following last year’s ban, which made it difficult to export high-performance graphics processing units such as the A100 and H100, NVIDIA has been manufacturing lower-performance units, such as the A800 and H800 for export, and these products are expected to be subject to export controls under the Amendments.
 

To prevent circumvention of the recently strengthened controls on advanced AI chips, the scope of the export license system has been expanded to include more than 40 countries in Country Group D, which lists countries of national security concern. Additionally, an export license is now required when the receiving party or its ultimate parent company are headquartered in the PRC, Macau or countries subject to US arms embargoes.
 

Controlled semiconductor equipment now includes 12 categories of semiconductor manufacturing equipment specifically used in the production of 14/16 nm non-planar transistor structure logic chips, covering those involved in the exposure, etching, deposition and cleaning processes (3B090 is deleted, 3B001 and 3B002 are revised). In particular, even lower-level deep ultraviolet (“DUV”) equipment is now subject to regulation, with certain high-end DUV equipment (ECCN 3B001.f.1.b.2.b) required to meet a 0% de minimis threshold. Moreover, the updated controls extend to cover the PRC, Macau and 21 other countries subject to US arms embargoes.
 

The Entity List has been updated to include a total of 13 PRC companies involved in the development of advanced computing chips. This includes semiconductor design firms such as “Shanghai Biren Intelligent Technology Co. Ltd.” and “Moore Threads Intelligent Technology Beijing Co. Ltd.” along with their subsidiaries.
 

In light of the aforementioned circumstances, companies are advised to carefully examine the specifics of the recently imposed US export controls and exercise caution when exporting semiconductors and related production equipment to the PRC. Additionally, monitoring industry trends would be beneficial, as the growing semiconductor regulatory disputes between the US and the PRC may introduce additional uncertainties for domestic companies.

Moreover, companies may benefit from keeping track of the Ministry of Trade, Industry and Energy (the “MOTIE”)’s future comments and instructions, as the MOTIE has stated that it will meticulously review US export control regulations to minimize their impact on Korean businesses. The MOTIE also emphasized that it will work closely with the US Government to ensure stability in the global semiconductor supply chain.

[Korean Version]