Explained: How Americans In Chinese Tech Firms Might Have To Choose Between US Citizenship And Job

The Joe Biden administration has further tightened technology export to Chinese technology industry, targeting semiconductor industry in the latest rules announced this month.

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Under the latest US technology export rules, US citizens working in Chinese firms might face a tough choice — quit their jobs or risk losing US citizenship.

The latest tech export rules by the Joe Biden administration are an attempt to further regulate the flow of technological know-how from the United States to China and to affect the Chinese ability to produce semiconductors —commonly called chips— which are the bedrock of modern electronic industry and are used in everything from our personal computers to electric vehicles and high-end military technology. 

Coupled with increased funding for domestic chip production, Biden's latest tech export rules are an attempt to wean the United States and the world off Chinese techonology and target its manufacturing base. 

Here we explain what are the latest US tech export control measures, how US executives in Chinese firms could be impacted, and what Biden aims with it.

What are latest US tech control rules?

The latest tech export control rules announced by the Biden administration not just target companies but also target individuals. 

Under these rules, companies would require licenses to export sensitive technology to China-based entities.

The Verge reported, "The new rules require manufacturers, like Intel and Micron, to receive a license from the Commerce Department in order to export semiconductors and chip-making equipment to Chinese companies. In addition, the administration issued several foreign direct product rules, banning international companies from exporting chips built with US technology."

The total size of the chip-based industry that might see substantial disruption with the rules is around $550 billion.

Bloomberg lists the following measures announced by Biden administration:

1. Ban on sending chips for artificial intelligence (AI) and high-performance computing and gear for chip production to China.

These restrictions are "intended to sever the flow of US know-how to China's military and surveillance systems", notes Bloomberg, which adds, "China’s AI chipmakers, including Biren, may face some restrictions on outsourcing production to Taiwan Semiconductor Manufacturing Company (TSMC)."

2. Chip-making gear restrictions covering production of both logic and memory chips.

Bloomberg explains, "Logic chips using so-called nonplanar transistors made with 16-nanometer technology or anything more advanced than that. Generally speaking, the smaller the nanometers, the more capable the chip...Foreign companies such as Samsung Electronics Co. and SK Hynix Inc. can apply for licenses to continue acquiring machinery they need for their plants in China."

3. Rules also effectively prohibit US persons from "supporting" the development or manufacture of chips covered by the restrictions.

It is this rule that puts US nationals in Chinese chip-related companies in a difficult spot.

4. The rules expand Unverified List that acts as a precursor to the Entity List, which bans exports of US designs and technology to entities such as Huawei. 

US nationals in Chinese firms in tough spot

Under latest tech export control rules, American citizens are permanent citizens are barred from supporting the development and production of advanced chips at Chinese factories, according to Fortune, which adds that such a norm was earlier only applicable on companies.

The effect of this rule is already being felt as companies have started taking Americans off chip development and production.

The South China Morning Post (SCMP) reported that there are dozens of chief-level executives that are covered under this rule.

"Most of these executives are naturalised citizens who were born in China and studied at American universities or worked in the US chip industry," reported SCMP. It further reported that top Chinese chip company Naura Technology Group has asked its American executives to stop working on chip research and development (R&D).

Effects of the rule are being felt outside China too. Bloomberg reported that Netherlands-based ASML Holding, which manufactures critical chipmaking equipment, told its US-based staff on Wednesday to halt all engagement with China.

Why US is squeezing tech export to China?

The basic idea is to not allow China to benefit from the US technology and expertise. 

Moreover, China has in recent decades emerged as the manufacturing hub, which means that it uses technology developed outside to manufacture products for the world. It is also accused of great theft of R&D progress and intellectual property (IP).

Biden is working on to make United States the hub of chip production. This also becomes important as repeated lockdowns in China under its Zero Covid policy means that international supply of chips is at the risk of frequent disruption. Great reliance on China has made the world aware of supply line crises during the ongoing Covid-19 pandemic.

Earlier this year, the US Congress passed a bill, which Biden signed into law, which aims to boost domestic chip production.

"In August, President Joe Biden signed the $280 billion CHIPS and Science Act, providing $52 billion in subsidies to boost companies choosing to build chip manufacturing plants in the US," reported The Verge.