Semiconductor Moment

• Semiconductors are the only commodity that is ubiquitous and Strictly regulated.
• Semiconductors are unique: nothing is as tightly controlled as semiconductors, and nothing is as tightly controlled as semiconductors.
• But this has put the industry in an extremely complicated situation.
• Other industries might be asking…are we next?

If you think so, it’s understandable. Global Trade Law Blog Has become Semiconductor News Blogand all the latest updates on semiconductor regulations that we’ve released in the last year or two. Yes, we acknowledge that. We have a lot of semiconductor customers and there are a lot of updates that they need to understand.

However, we may not have adequately explored the following issues: Why: Why are semiconductors so important? And why should other industries care about semiconductors for the rest of us?

We found some answers in recent conversations with clients.

A shrewd question. At lunch, a lawyer for a global semiconductor client asked, “What other industries are regulated in the same way as we are?” After a pause, I asked, “Financial industry?” Given the complex web of anti-money laundering and sanctions regulations that we help our banking and financial clients navigate.

“No, no,” my client insisted. “What industry?” make “What can we do? What other commodities are regulated like semiconductors? Who else has this compliance burden?” After much deliberation, we came to a simple but somewhat revealing conclusion:

No other industry in the world is as heavily regulated as semiconductors. Semiconductor regulations are unique because no other commodity is as ubiquitous as semiconductors. and Vital to national security.

Semiconductors are everywhere. In your office, living room, or car, there are dozens or even hundreds of semiconductors at work. They are the lifeblood of contemporary technology. You may know them in the phone, tablet, or computer you’re using to read this article, but they’re also in the office coffee machine, your LED light bulb, and the key you use to start your car or enter a building.

Of course, many other commodities may be equally ubiquitous (there may be pens, paper, and chairs in the room), but no Those ones The regulatory level for commodities is close to that for semiconductors.

Semiconductors at the heart of a global struggle

Some items are as heavily regulated as semiconductors (such as nuclear, chemical, or biological dual-use items), but you won’t see many of them in offices. (1)

As we have noted in this blog, conference speeches, and television interviews, the United States and China see themselves as engaged in a global struggle for technological dominance—and that struggle is now being fought in the semiconductor industry. The United States has focused its “technological containment” efforts on semiconductors, issuing wave after wave of regulations targeting integrated circuits and the technologies and equipment that make them. At the same time, the U.S. government is promoting investment in semiconductors (through the CHIPS Act) because it understands that semiconductors are a key element to the security and resiliency of the U.S. supply chain.

Moreover, U.S. regulators view semiconductors as a bottleneck for regulating technologies that rely on high-end processing power, such as AI. It might be hard to draw a line and say “well, ChatGPT isn’t advanced enough that we need to control its export, but Q* might be”—but of course, by the time you draw that line, another AI that’s better, faster, and smarter(2) has been developed. Instead, the U.S. government is focused on preventing the powerful chips that power advanced AI from falling into the hands of parties it considers adversaries.

As a result, semiconductors are subject to some of the most extraterritorial laws—have you ever seen one? exit Restrictions on U.S. Person Activities or the Foreign Direct Product Rule? — and the restrictive export controls in the EAR. In fact, 0% Minimum Level, applicable to some foreign-made semiconductor manufacturing equipment, its controls are as strict as those in the International Traffic in Arms Regulations!

Outside Observation: What Other Industries Can Learn

So, there is nothing more common than semiconductors that is so tightly controlled, and nothing more common than semiconductors that is so tightly controlled. Furthermore, there is no design or production industry that is so tightly regulated. But is it really so?

While no other industry finds itself in this position of both ubiquity and restriction as new technologies develop and become more widespread (3), others may find themselves at this unpleasant crossroads. The key signals to look for are those where (1) the technology is (or could be) used for a variety of purposes, but also where it (2) could drive future foreign policy or national security threats.

Artificial intelligence is the obvious answer, as discussed above. Now Difficult to regulate, and Now Semiconductor regulation is key to addressing this problem,(4) but there may be other measures as well. We will be watching them closely and of course reporting on them here.

footnote

(1) Or, if you prefer, our work environment is completely different.

(2) Hopefully, AI disruption won’t diminish our ability or pleasure in coining words.

(3) If you can identify the answer on the postcard!

(4) Although we did get a 0Y521 class of software for controlling geospatial imagery, used to train deep learning neural networks to automatically analyze geospatial imagery and point clouds.