Export Controls and Technology Decoupling: The New Frontier of Trade Policy

The United States' October 2022 export control regulations restricting China's access to advanced semiconductors and chip-making equipment represent what many analysts describe as the most significant expansion of export control policy since the Cold War. The regulations, subsequently expanded and followed by similar measures from Japan and the Netherlands, effectively prohibit the sale of advanced chips and the equipment to manufacture them to Chinese entities — creating what the US government explicitly describes as a technology decoupling in strategically critical sectors.\n\nFor trading companies operating at the intersection of technology supply chains, the implications are substantial and still unfolding. Products that were freely tradeable twelve months ago are now subject to licensing requirements, end-use verification obligations, and in some cases outright prohibition. Compliance programmes developed for conventional export controls — primarily focused on sanctions lists and weapons-related items — are inadequate for the new technology-focused regime.\n\nTHE SEMICONDUCTOR CASE\nSemiconductors are the paradigmatic example of the new export control landscape. Advanced logic chips — those manufactured at process nodes below about 14 nanometres — are now subject to comprehensive restrictions for Chinese customers. The restrictions extend not just to the chips themselves but to the equipment used to manufacture them (ASML's extreme ultraviolet lithography systems being the most commercially significant example) and to software tools used to design advanced chips.\n\nThe practical effect is to prevent China from developing domestic semiconductor manufacturing capabilities that meet the performance requirements of advanced AI systems — at least using current technology pathways. Whether this objective is achievable over a 5-10 year horizon is genuinely uncertain; China's semiconductor industry has received enormous government subsidies and has made meaningful progress on certain aspects of the technology.