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By Alexandra Alper, Karen Freifeld and Stephen Nellis
WASHINGTON/NEW YORK, July 8 (Reuters) - The Biden administration is considering new targeted restrictions on shipments of chipmaking tools to China, seeking to hamstring advances by China's largest chipmaker, SMIC, without slowing the flow of chips into the global economy, five people familiar with the matter told Reuters.
The Commerce Department, which oversees export policy, is actively discussing the possibility of banning exports of chipmaking tools to those Chinese factories that make advanced semiconductors at the 14 nanometer node and smaller, the people said, to stymie China's efforts at making more state-of-the-art chips.
In the meantime, the agency would allow those same tools to be sent to plants owned by the same firms but which make less advanced semiconductors, to safeguard the supply of commodity chips as the world recovers from a chip shortage.
A spokesperson for the Commerce Department did not comment directly on the idea, but said "with respect to semiconductor-related export license applications in particular, (Commerce) and the other reviewing agencies ... consider a variety of factors in making licensing decisions, including the technology node for the proposed export."
The agency also stressed that the Biden administration regularly consults with allies and the industry about how best to tailor measures to deny China access to advanced technologies with both civilian and military uses.
SMIC did not respond to a request for comment.
A spokesman for the Chinese Embassy in Washington, Liu Pengyu, said: "By repeatedly seeking to politicize, weaponize and ideologize economic and trade issues and exercise technological blockade and decoupling against other countries, the U.S. would only remind other countries of the risks of technological dependence on the U.S. and prompt them to quickly become independent and self-reliant in science and technology."
If the nascent idea moves forward, it would be the first time the Commerce Department officially takes a factory-by-factory approach to export policy, although sources said unofficially it was now applying the approach to SMIC.
It would also allow the Biden administration to tighten export controls on SMIC's most advanced factories, while allowing tools to flow to its facilities that make commodity chips for automobiles and everyday consumer electronics.
That, in turn, would help further the U.S. goal of halting China's progress toward more advanced node semiconductor manufacturing, to safeguard U.S. competitiveness and national security.