California Democrats fear US tech firm ‘death spiral’ with more China curbs

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WASHINGTON (Reuters) – California Democrats are calling on the Biden administration to freeze reported plans to impose fresh restrictions on U.S. technology exports to China, arguing unilateral curbs benefit foreign rivals at the expense of U.S. businesses.

Washington has imposed a raft of restrictions on exports of chips and chipmaking equipment to China in recent years, fearing Beijing could use the technology to bolster its military. The Netherlands and Japan, home to chipmaking equipment producers ASML and Tokyo Electron respectively, have also restricted equipment exports to China but stopped short of matching some of the toughest U.S. measures.

Reuters reported last month that the Commerce Department plans a new rule that will expand U.S. powers to stop exports of semiconductor manufacturing equipment from some foreign countries to Chinese chipmakers, but will exempt Japan and the Netherlands.

In a letter dated Aug. 13, Senator Alex Padilla and Representative Zoe Lofgren argued that a further round of controls “could send longstanding U.S. companies into a death spiral,” because U.S. allies have not imposed similarly aggressive China export curbs on their own companies.

“We ask that you pause additional unilateral export controls until you have adequately justified that such controls will not damage U.S. competitiveness in advanced semiconductors and semiconductor manufacturing equipment,” the lawmakers said in the letter, addressed to Alan Estevez, who oversees export controls at the Commerce Department.

Commerce said it had been contacted by the congressional office and would respond through appropriate channels.

The letter is a sign of growing pushback against Biden’s semiconductor policy among Democrats from California, home to the U.S.’s top chipmaking equipment companies LAM, Applied Materials and KLA.

In April, Democratic California Governor Gavin Newsom and Padilla urged the Biden administration to reverse its decision to cancel a subsidy program for building and expanding semiconductor research and development facilities. That program had been seen as likely to benefit Applied Materials.

In their August letter, Padilla and Lofgren stressed that they were not asking Biden to roll back restrictions on China, but simply opposed the imposition of rules “with questionable national-security benefits” when allies do not follow suit.

“We urge you to use all forms of leverage available to the U.S. government to bring our allies along in aligning their export controls with ours,” they wrote.

In June, Reuters reported that Estevez traveled to Japan after meeting with the Dutch government to urge the allies to further restrict China’s ability to produce cutting-edge semiconductors.

(Reporting by Alexandra Alper; Editing by Rod Nickel)