The Biden administration is weighing actions that would target high-tech chip architecture known as gate all-around, Bloomberg reported, citing sources familiar with the matter. GAA refers to new transistor architecture that could lead to better performance and lower power consumption.

The additional controls to further limit China’s access to semiconductor chip technology and manufacturing capabilities. Here are the key points:The U.S. has already implemented two major waves of export controls targeting China’s semiconductor industry in October 2022 and October 2023. These controls aimed to restrict China’s ability to obtain advanced chips, manufacturing equipment, and design software for leading-edge semiconductors.However, the U.S. continues to identify gaps and loopholes that Chinese companies are exploiting to access chip technology. For example, Nvidia created a new AI chip (A800) with reduced performance to comply with the October 2022 rules, but this was later blocked by the October 2023 update.To address these gaps, the U.S. is preparing a third wave of semiconductor export controls and entity listings targeting China:

• Expanding restrictions on artificial intelligence (AI) chips to cover a wider range of performance tiers, severely limiting China’s access to advanced AI chips.
• Strengthening controls on semiconductor manufacturing equipment by adding more restricted technologies and expanding the number of countries subject to licensing requirements.
• Adding 13 Chinese companies involved in advanced chip development to the Entity List, subjecting them to tighter export restrictions.
• Revising the Foreign Direct Product Rule (FDPR) to include countries beyond China, aiming to prevent circumvention through transshipment.

The U.S. aims to create a “small yard, high fence” approach, restricting a narrow set of critical technologies while imposing stringent controls. However, experts note challenges like China’s rapidly expanding semiconductor capabilities, lack of full alignment with allies, and the difficulty of controlling widely available commercial technologies.While these controls aim to protect national security, there are concerns about potential harm to U.S. industry, including loss of Chinese market share, retaliatory actions from China, and constraints on innovation and revenue needed for future R&D investments.

South Korea’s Samsung Electronics has already started production for 3-nanometer chips with GAA technology. Taiwan Semiconductor Manufacturing Company reportedly plans to include GAA in its upcoming 2-nanometer chips.

Shares of TSMC and Samsung Electronics were up 1.6% and 0.4%, respectively, in Wednesday morning trading in Asia.

The U.S. Department of Commerce and the Bureau of Industry and Security, which oversees export controls, did not immediately respond to CNBC’s request for comment.

The U.S. passed a series of export controls starting in October 2022 aimed at restricting China’s access to advanced chip technology, particularly those used in AI applications. It then further tightened export curbs on AI chips to China in October last year, seeking to halt shipments of the more advanced chips from Nvidia and other firms.

The controls severely restrict U.S. companies from selling advanced chips, equipment, and software to China, cutting them off from a major market.

• This loss of Chinese demand will reduce revenue and scale for U.S. semiconductor firms, raising costs and limiting funds for critical R&D investments needed to stay competitive.

• The controls are accelerating China’s efforts to develop its own domestic semiconductor capabilities to reduce reliance on U.S. technology.
• China is expected to further subsidize its semiconductor industry, potentially leading to overcapacity in legacy chips that could undercut existing producers.

• There is a risk that foreign companies will start “designing out” U.S. semiconductor technology from their products to avoid the export controls, diminishing the U.S. industry’s market share over time.
• This could mirror the impact of previous satellite export controls that saw the U.S. industry’s global market share shrink dramatically.

• The controls create uncertainty for companies’ long-term planning and investments in the complex global semiconductor supply chain.
• There are worries the broad controls target widely available technologies, allowing alternative suppliers to emerge and potentially design out U.S. inputs.

• The effectiveness of the U.S. controls hinges on allied nations like the Netherlands, Japan, and South Korea implementing complementary export restrictions.
• If allies don’t align, Chinese firms could simply acquire comparable foreign semiconductor components and equipment to circumvent the U.S. rules.

While aiming to protect national security, the controls risk diminishing the revenue, scale, and competitiveness of U.S. semiconductor firms, while accelerating efforts by China and others to develop non-U.S. supply chains, potentially reshaping the global industry in the long run.

Bloomberg reported that a draft version of the potential GAA restrictions was deemed “overly broad.” It added that it was not clear if the measure would target China’s GAA development or bar foreign companies from selling to China.

In May, China piled 344 billion Chinese yuan ($47.5 billion) into a third chip fund seen as a move to boost “self-reliance in science and technology.” The move comes as countries like the U.S. and the Netherlands seek to curb China’s tech power.

Jeffrey Newman is a whistleblower lawyer, whose firm represents whistleblowers in healthcare fraud cases under the False Claims Act (FCA) and also under the Securities and Exchange, FINCEN and CFTC whistleblower programs. He can be reached at Jeff@JeffNewmanLaw.com or at 617-823-3217