The US has taken its next step in its boldest efforts yet to disrupt China's military by blocking access to memory chips and chip-making equipment that are crucial to modern defense systems like stealth aircraft, satellites, and cruise missiles. The Wall Street Journal reported yesterday that US chip equipment suppliers have withdrawn dozens of employees with key expertise and paused business activities at Yangtze Memory Technologies Co. (YMTC), "China's leading memory chip maker."

This is different from previous actions the US has taken by targeting specific technologies or individual firms, the Journal reported. Among key suppliers that "people familiar with the matter" told WSJ were halting operations are two major US firms, KLA Corp. and Lam Research Corp. Just weeks ago, the investment advising company The Motley Fool suggested that Lam Research "may be one of the most important companies in the world," noting that Intel is a key customer and that it serves a global market. Reuters reported that KLA losing its China market has restricted the company from its "largest geographic market, bringing in $2.66 billion in sales."

YMTC and Lam Research didn't respond to Ars' or WSJ's requests for comment. KLA Corp. chief communications officer Randi Polanich confirmed to Ars that "as of now, we cannot comment."

Blocking YMTC, but also impacting the global supply

Last month, the US Department of Commerce announced its plans to "keep advanced technologies out of the wrong hands" by restricting sales of memory chips to China and Russia. Soon after, it was discovered that YMTC—a Chinese state-owned manufacturer—was violating US export controls and funneling memory chips to Chinese telecoms firm Huawei. It seemed likely then that the Biden administration would respond to increased pressure from the right and left to keep memory chips out of China by cutting off YMTC, and that's what happened this week.

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The Wall Street Journal reported that without key experts staffing US factories, Chinese chip manufacturers like YMTC could be "cut off from upgrades, maintenance expertise, and future technology they need to develop chips."

However, according to a Reuters report today, the United States' newest export curbs on China have also introduced "unintended consequences" that could affect everyone waiting for the global chip supply to stabilize. By requiring firms like KLA and Lam Research to halt operations and preventing foreign chip technology firms based in China from exporting products, the US could further delay shipments and disrupt the global supply chain, as well as US access to memory chips.

For non-Chinese firms based in China, the US apparently plans to review licenses on a case-by-case basis to approve exports, but no Chinese firms are expected to be granted a reprieve from the export rules, Reuters reported.

In an earlier report, Reuters suggested that the US export curbs could work to keep memory chips out of China but that without other nations joining the US in similar export curbs, an official told Reuters that "the unilateral controls we're putting into place will lose effectiveness over time."

A US Commerce Department spokesperson told Reuters that the Biden administration will likely adapt as needed to avoid disruptions to US memory chip access, saying that "the department hopes to get input from stakeholders about the rule and may consider changes."