Bipartisan US legislation would block China's access to advanced lithography and etching equipment, closing loopholes that allowed restricted firms to upgrade older fabs.
A bipartisan group of U.S. senators has introduced legislation that would dramatically expand export restrictions on advanced semiconductor manufacturing equipment to Chinese companies, targeting firms like SMIC, Huawei, and YMTC that are developing cutting-edge chip technologies.
(Image credit: SMIC)
The proposed MATCH Act (Manufacturing, Assembly, Testing, and Chipmaking Controls) represents a fundamental shift in how the U.S. regulates semiconductor equipment exports. Rather than controlling shipments based on specific fabrication facilities, the new approach would impose company-wide restrictions on designated Chinese entities.
Current Restrictions vs. Proposed Changes
Under existing rules implemented in late 2021, the U.S. government requires export licenses for wafer fabrication equipment capable of:
- 14nm process technologies for logic chips
- 18nm-class DRAM fabrication processes
- 128-layer or more NAND flash production
These restrictions apply when shipping to Chinese entities, but critically, they regulate exports to specific fabs rather than entire companies. This has created a significant loophole: companies like Semiconductor Manufacturing International Corporation (SMIC) can legally purchase advanced tools like the ASML Twinscan NXT:1950i/1980Di for use in older facilities, then potentially redirect them to their leading-edge fabs producing 7nm-class chips.
Company-Wide Export Controls
The MATCH Act would close this loophole by implementing hybrid controls that combine company-based restrictions with existing fab-level triggers. This means that once a Chinese company is designated as restricted, it cannot acquire advanced equipment for any of its facilities, even those using older process nodes.
"Certain entities, including [CXMT, Hua Hong/HLMC, Huawei, SMIC, and YMTC] are engaged in efforts to produce advanced-node integrated circuits that are especially crucial for the Military-Civil Fusion efforts of the People's Republic of China and warrant comprehensive export controls," the proposal states.
Global Coordination and Extraterritorial Reach
The legislation includes provisions to align international semiconductor equipment controls. Initially, the U.S. would pursue coordination with allied supplier nations including the Netherlands, Japan, South Korea, and Taiwan. If these efforts fail, the bill authorizes expansion of restrictions to cover foreign-made tools containing any amount of American technology or requiring U.S.-based servicing.
This extraterritorial approach aims to prevent Chinese companies from circumventing restrictions by purchasing equipment from non-U.S. suppliers that incorporate American components or rely on U.S. technology for maintenance.
Preventing Intermediary Diversion
The MATCH Act explicitly addresses concerns about equipment diversion through third-party intermediaries. Export controls would attach not only to the initial transaction but also to end-use, end-user, reexport, and servicing requirements. This comprehensive approach means that routing equipment through a third-party entity would not bypass restrictions but would instead expose all parties involved to potential sanctions, including loss of access to advanced equipment and servicing capabilities.
Strategic Calibration Mechanism
A notable feature of the proposed legislation is the introduction of a 75% threshold that serves as a built-in calibration mechanism. This threshold limits controls to genuine technological chokepoints that restricted countries cannot produce themselves.
For example, if China can meet 75% of its domestic demand for certain tools like etching or deposition equipment, the U.S. government would no longer restrict shipments of those tools to China. This provision allows restrictions to be relaxed if domestic alternatives reach sufficient scale, providing flexibility while maintaining strategic leverage where it matters most.
Market Implications for Equipment Makers
The calibration mechanism has particular significance for American semiconductor equipment companies. Currently, firms like Applied Materials maintain technological leads over Chinese competitors such as AMEC and Naura. However, Chinese manufacturers are rapidly advancing their capabilities and already offer world-class tools in some categories.
Once Chinese alternatives reach sufficient scale to meet the 75% threshold, the U.S. government would cease regulating shipments of those tools to Chinese customers. This creates a dynamic where American companies must maintain their technological advantages while preparing for potential market changes as Chinese competitors mature.
Impact on China's Semiconductor Industry
The proposed restrictions would significantly impact China's ability to upgrade its semiconductor manufacturing capabilities. Leading Chinese chipmakers would lose access to advanced lithography and etching equipment that could be used to enhance older fabs or support leading-edge production.
While the legislation cannot eliminate all small-scale leakage, black market activity, or one-off tool diversion, it is designed to eliminate the reliable supply chains that Chinese entities currently use to acquire advanced fabrication equipment for building and maintaining world-class semiconductor facilities.
The MATCH Act represents a comprehensive approach to semiconductor export controls that addresses current loopholes while providing mechanisms for adjustment as the global semiconductor equipment landscape evolves. If passed, it would mark a significant escalation in U.S. efforts to restrict China's access to advanced chipmaking technologies.
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