US to bar Chinese semiconductors from federal procurement by 2027

The US will exclude Chinese semiconductors from its government procurement network starting late next year. This move is seen as a preemptive measure to block major companies from considering Chinese semiconductor imports amid recent memory chip shortages and price surges.

The US Federal Acquisition Regulation Council announced in the Federal Register on the 17th of last month that semiconductors designed or produced by Chinese foundry giant SMIC, DRAM manufacturer CXMT, NAND flash producer YMTC, and their affiliates, as well as products containing these chips, will be banned from government procurement. The rule will take effect from December 23 of next year, effectively excluding Chinese semiconductors from the US federal supply chain. The council stated, “Certain semiconductors could pose a threat to national security,” adding concerns over “the potential insertion of backdoors in chips and risks of infiltration into core infrastructure systems such as defense, communications, and energy.”

Once implemented, manufacturers will be unable to supply products containing semiconductors produced by these Chinese companies to the US government. This includes computers or smartphones sold to agencies like the Federal Communications Commission (FCC) or the Federal Bureau of Investigation (FBI), which will no longer be allowed to contain Chinese-made chips. The rule applies to all purchases under $15,000 and even mass-market finished products, meaning it will likely be enforced across nearly all electronic devices.

Analysts suggest the US is acting to preemptively block companies struggling with semiconductor shortages from turning to Chinese suppliers. With memory chip prices more than doubling this year alone compared to the previous year, PC makers like Dell and HP, as well as smartphone companies such as Apple, are reportedly considering Chinese products. The reduced influence of Chinese semiconductor firms is expected to benefit domestic players like Samsung Electronics and SK Hynix, potentially creating windfall gains for the South Korean industry. The Chosun