By: Parmis Mokhtari-Dizaji
Edited By: Stephan Shiwei Wang
Why This Policy Moment Matters
For decades, semiconductors have quietly powered American economic growth and military strength. Semiconductors power not only defense systems and economic performance, but also the technologies increasingly shaping modern life, from artificial intelligence and telecommunications to the infrastructure that keeps economies and societies running.1 Today, they sit at the center of a far more assertive and enduring policy effort.2
Since late 2022, the United States has significantly broadened the scope of its export controls. Rather than focusing on a narrow set of physical technologies and firms, policymakers have constructed a multi-layered system of restrictions that increasingly governs access to advanced computing capabilities.3 Over the past eighteen months, federal agencies have repeatedly revised performance thresholds that determine which technologies are restricted, expanded the Foreign Direct Product Rule to reach goods produced abroad using U.S. technology, and added dozens of Chinese firms to the Entity List, a restricted trade list of entities that pose a risk to U.S. national security or foreign policy interests. Federal agencies have also initiated consultations on limiting access to cloud and data center services that support artificial intelligence computing.4 Export controls are no longer treated as an exceptional measure, but are emerging as a defining instrument of U.S. technology policy.
The Shift from Hardware Controls to Capability-Based Regulation
Early U.S. export controls concentrated primarily on tangible goods, particularly high-end computer chips and the specialized equipment required to produce them.5 This approach reflected an assumption that restricting a limited set of critical inputs would be sufficient to slow technological advancement.
Beginning in 2023 and continuing through 2024, the Department of Commerce’s Bureau of Industry and Security (BIS) revised how it defines restricted advanced computing technologies.6 Rather than relying on a single technical benchmark, the updated framework incorporated multiple indicators of computing capability, including overall processing capacity and the way individual components are combined within larger systems.7 These changes were designed to address efforts by firms to comply formally with export rules while still achieving similar functional outcomes. The policy objective thus shifted from blocking specific products to preventing the circumvention of regulatory intent. In doing so, the United States signaled a move away from regulating discrete components and toward governing aggregate computing capabilities.8
This logic has since been extended beyond physical hardware. Proposed rules for 2025 expanded export controls to cover data centers and cloud-based access to advanced computing resources through new licensing requirements and expanded end-user validation frameworks.9 Under these proposals, firms face restrictions not only on the sale of restricted technologies, but also on providing indirect access to computing power through remote services. The broader implication is that U.S. export control policy is increasingly concerned with how computing capacity is accessed, deployed, and scaled, rather than solely with the physical movement of chips across borders.
Recent Developments and the Limits of Earlier Assumptions
Huawei’s August 2023 release of the Mate 60 Pro smartphone serves as an instructive case for evaluating the effects of recent U.S. export controls.10 The device incorporated a domestically produced processor that demonstrated relatively high computing performance despite restrictions on access to the most advanced manufacturing technologies.11 This outcome challenged expectations that existing export controls would make such performance levels unattainable.12
At the same time, major production challenges remained. Analysts estimated that fewer than 50 percent of chips produced were usable, compared with industry norms of roughly 90 percent or more at leading global firms, making each chip significantly more expensive and limiting how many devices could be produced at scale despite clear technical progress.13 Taken together, these developments suggest that U.S. export controls have imposed meaningful economic constraints without fully preventing technological advancement. Their effectiveness is therefore better assessed through impacts on production costs, scalability, and market viability than through isolated measures of technical achievement alone.
Enforcement Challenges and Implementation Limits
As the scope of U.S. export controls has widened, enforcement has emerged as a central constraint on their effectiveness. Analyses by the Congressional Research Service (CRS) and investigative reporting by the Stimson Center indicate that firms retain avenues for indirect access to restricted computing capabilities, particularly through intermediaries in third countries and through foreign-based cloud service providers that operate equipment designed with U.S. technology.14, 15 These findings highlight the persistence of access pathways that fall outside the direct reach of U.S. regulators.
Furthermore, recent reporting indicates that some firms have shifted computational workloads to overseas facilities as a way to retain access to restricted technologies, highlighting how indirect arrangements can weaken regulatory intent.16 Additional investigations in 2024 uncovered the large-scale diversion of restricted artificial intelligence chips through intermediary jurisdictions, pointing to persistent challenges in tracking end use across complex global supply chains. Because coordination among U.S. allies and partners remains uneven, third-country intermediaries continue to pose significant challenges for enforcement.
At the same time, oversight assessments suggest that enforcement capacity has not expanded in proportion to the growing breadth of export control. As a result, gaps between formal regulatory design and practical implementation have become increasingly consequential.17 The effectiveness of export controls now depends not only on the content of the rules themselves, but also on the strength of verification mechanisms and the depth of international coordination supporting their enforcement.
Industry Responses to Export Controls
In response to expanding export controls, U.S. technology firms have modified their commercial strategies rather than withdrawing from the Chinese market. Some firms have introduced market-specific products with slightly reduced capabilities designed to comply with evolving regulatory thresholds, while manufacturers of production equipment have adjusted sales and contracting practices in anticipation of further regulatory changes.18
Analysts further note that China has substantially expanded its capacity and market presence in widely used, foundational semiconductor technologies. Between 2015 and 2023, Chinese production capacity in these segments grew more than four times faster than global demand, significantly increasing China’s domestic and global market share.19 This scale dynamic, combined with China’s role as one of the world’s largest sources of semiconductor demand, helps explain why commercial engagement with the Chinese market has persisted despite tightening restrictions.
These adaptive strategies are likely to shape longer-term patterns of research and development. As regulatory compliance and risk management become more prominent considerations, firms may place less emphasis on achieving frontier technological performance in restricted markets, instead prioritizing incremental innovation and product differentiation. Export controls are therefore influencing not only access to advanced technologies, but also the direction of innovation itself.
China’s Evolving Semiconductor Strategy
China’s policy response has evolved alongside the expansion of U.S. export controls. Rather than focusing only on matching the most advanced chips produced by global leaders, Chinese authorities have directed increasing state support toward expanding production of widely used semiconductor components that power cars, consumer electronics, and industrial systems.20 At the same time, Beijing has introduced export licensing requirements for key raw materials such as gallium and germanium, which are essential inputs for chip production and can be used for both civilian and military purposes.20 Looking ahead, analysts project that this strategy could significantly increase China’s share of global semiconductor manufacturing capacity over the next decade, even without achieving dominance in the most cutting-edge technologies.21
These measures reflect a strategic emphasis on technological self-sufficiency under conditions of constrained access to cutting-edge tools and inputs. Although this approach does not eliminate the technological gap at the most advanced frontier, it has the potential to alter competitive dynamics in downstream industries that rely on widely available semiconductor components.
The Policy Question Has Changed
The central policy question has shifted from whether export controls can slow China’s access to advanced semiconductor technologies to whether those controls can be effectively maintained as they continue to expand. According to assessments by the CRS, export controls can impose meaningful constraints by making it harder for firms to produce advanced chips at scale and at competitive cost.22 A key challenge is whether this growing set of restrictions can be administered over time, especially as controls extend beyond physical products to include computing capacity, software, and related services.23
As export controls become more complex, they create additional challenges for enforcement, require closer coordination with allied governments, and raise the risk of unintended effects on global supply chains and commercial activity. CRS analysts note that increasing regulatory complexity can raise compliance burdens for firms and place strain on government enforcement capacity, making sustained oversight and international coordination essential.24
Conclusion
U.S. semiconductor export controls have reached an inflection point. What began as targeted restrictions on specific technologies has evolved into a broad framework governing how advanced computing power is produced, accessed, and scaled globally. Evidence from recent policy updates, enforcement challenges, and observed responses by firms and governments suggests that the next phase of competition will be shaped less by the expansion of rules than by how effectively existing controls are implemented and coordinated.
Export controls can constrain scale, efficiency, and commercialization without fully halting technological progress. Their long-term significance lies not in absolute technological denial, but in how they reshape incentives, innovation pathways, and market structure over time. Their success will ultimately depend on sustained enforcement capacity and international alignment rather than regulatory ambition alone.
Work Cited
- Blevins, Emily G., Yong W. Kwon, and Karen M. Sutter. 2023. “Semiconductors and the Semiconductor Industry.” Congressional Research Service, Report R47508. Published April 19.
https://www.congress.gov/crs-product/R47508. - The White House. 2026. “Adjusting Imports of Semiconductors, Semiconductor Manufacturing Equipment, and Their Derivative Products into the United States.” Proclamation. Published January 14.
https://www.whitehouse.gov/presidential-actions/2026/01/adjusting-imports-of-semiconductors-semiconductor-manufacturing-equipment-and-their-derivative-products-into-the-united-states/. - U.S. Department of Commerce, Bureau of Industry and Security. 2022. “BIS Updated Public Information Page on Export Controls Imposed on Advanced Computing and Semiconductor Manufacturing Items to the People’s Republic of China.” Press release. Published October 28.
https://www.bis.gov/press-release/bis-updated-public-information-page-export-controls-imposed-advanced-computing-semiconductor. - U.S. Department of Commerce, Bureau of Industry and Security. 2024. “Foreign-Produced Direct Product Rule Additions and Refinements to Controls for Advanced Computing and Semiconductor Manufacturing Items.” Federal Register. Published December 5.
https://www.federalregister.gov/documents/2024/12/05/2024-28270/foreign-produced-direct-product-rule-additions-and-refinements-to-controls-for-advanced-computing. - U.S. Department of Commerce, Bureau of Industry and Security. 2023. “Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections.” Federal Register. Published October 25.
https://www.federalregister.gov/documents/2023/10/25/2023-23055/implementation-of-additional-export-controls-certain-advanced-computing-items-supercomputer-and. - U.S. Department of Commerce, Bureau of Industry and Security. 2025. “Commerce Further Restricts China’s Artificial Intelligence and Advanced Computing Capabilities.” Press release. Published March 25.
https://www.bis.gov/press-release/commerce-further-restricts-chinas-artificial-intelligence-advanced-computing-capabilities. - Allen, Brooks E., Brian J. Egan, Eytan J. Fisch, Michael E. Leiter, Ondrej Chvosta, Tatiana O. Sullivan, Jillian V. Norton, and Patrick Stewart. 2023. “BIS Updates October 2022 Semiconductor Export Control Rules.” Skadden Insights. Published October 25.
https://www.skadden.com/insights/publications/2023/10/bis-updates-october-2022-semiconductor-export-control-rules. - Sidley Austin LLP. 2025. “New U.S. Export Controls on Advanced Computing Items and Artificial Intelligence Model Weights: Seven Key Takeaways.” Data Matters. Published January 21.
https://datamatters.sidley.com/2025/01/21/new-u-s-export-controls-on-advanced-computing-items-and-artificial-intelligence-model-weights-seven-key-takeaways/. - U.S. Department of Commerce, Bureau of Industry and Security. 2025. “Framework for Artificial Intelligence Diffusion.” Federal Register. Published January 15.
https://www.federalregister.gov/documents/2025/01/15/2025-00636/framework-for-artificial-intelligence-diffusion. - Reuters. 2023. “Teardown of Huawei’s New Phone Shows China’s Chip Breakthrough.” Published September 4.
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https://www.techinsights.com/blog/techinsights-finds-smic-7nm-n2-huawei-mate-60-pro. - He, Alex. 2024. “In the Global AI Chips Race, China Is Playing Catch-Up.” Centre for International Governance Innovation. Published September 18.
https://www.cigionline.org/articles/in-the-global-ai-chips-race-china-is-playing-catch-up/. - Goh, Brenda. 2023. “Huawei’s New Smartphone Uses More China-Made Parts Than Previous Models, TechInsights Says.” Reuters. Published September 7.
https://www.reuters.com/technology/huaweis-new-smartphone-uses-more-china-made-parts-than-previous-models-2023-09-07. - Sutter, Karen M. 2025. “U.S. Export Controls and China: Advanced Semiconductors.” Congressional Research Service, Report R48642. Published September 19.
https://www.congress.gov/crs-product/R48642. - Baums, Ansgar. 2024. “The ‘Chokepoint’ Fallacy of Tech Export Controls.” Stimson Center. Published February 6.
https://www.stimson.org/2024/the-chokepoint-fallacy-of-tech-export-controls/. - Adelman, Jacob. 2025. “China’s Tencent Is Accessing Banned Nvidia Chips Through the Cloud.” Barron’s. Published December 19.
https://www.barrons.com/articles/china-tencent-nvidia-blackwell-chips-cloud-9d5e5998. - Freifeld, Karen, and Alexandra Alper. 2025. “U.S. Government Turmoil Stalls Thousands of Export Approvals, Sources Say.” Reuters. Published August 1.
https://www.reuters.com/world/us/us-government-turmoil-stalls-thousands-export-approvals-sources-say-2025-08-01/. - Renshaw, Jarrett, and Karen Freifeld. 2025. “Nvidia’s Resumption of AI Chips to China Is Part of Rare Earths Talks, Says U.S.” Reuters. Published July 15.
https://www.reuters.com/technology/nvidia-resume-h20-gpu-sales-china-2025-07-15/. - U.S.–China Economic and Security Review Commission. 2025. “Made in China 2025: Evaluating China’s Performance.” Published November 14.
https://www.uscc.gov/research/made-china-2025-evaluating-chinas-performance. - Reuters. 2023. “China Export Curbs Choke Off Shipments of Gallium, Germanium for Second Month.” Published October 19.
https://www.reuters.com/world/china/china-export-curbs-choke-off-shipments-gallium-germanium-second-month-2023-10-20. - Goujon, Reva, Jan-Peter Kleinhans, and Laura Gormley. 2024. “Thin Ice: U.S. Pathways to Regulating China-Sourced Legacy Chips.” Rhodium Group. Published May 7. https://rhg.com/wp-content/uploads/2024/05/Thin-Ice-US-Pathways-to-Regulating-China-Sourced-Legacy-Chips.pdf.
- Sutter, Karen M. 2025. “U.S. Export Controls and China: Advanced Semiconductors.” Congressional Research Service, Report R48642. Published September 19.
https://www.congress.gov/crs-product/R48642. - U.S. Department of Commerce, Bureau of Industry and Security. 2023. “Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections.” Federal Register. Published October 25.
https://www.federalregister.gov/documents/2023/10/25/2023-23055/implementation-of-additional-export-controls-certain-advanced-computing-items-supercomputer-and.
24. Blevins, Emily G., Yong W. Kwon, and Karen M. Sutter. 2023. “Semiconductors and the Semiconductor Industry.” Congressional Research Service, Report R47508. Published April 19.
https://www.congress.gov/crs-product/R47508.
Author Bio 
Parmis Mokhtari-Dizaji is a sophomore at Cornell University, pursuing a B.S. in Public Policy at the Jeb E. Brooks School of Public Policy, with minors in Applied Economics, Law & Society, and Design Innovation & Strategy. Her interests center on migration and resettlement policy, sustainability, and human-centered design, as well as technological innovation for social and environmental good. At Cornell, she serves as a project manager and analyst for Social Enterprise at Cornell, where she leads consulting projects that advance social impact through business and emerging technologies. She also serves as the research and program coordinator for the Cornell Law-Med Project, contributing to asylum research that bridges medical and legal evidence, and works with the Global Design Initiative for Refugee Children to develop participatory design solutions for displaced youth. Additionally, Parmis designs with the Medium Design Collective Incubates Subteam and writes for the Cornell Policy Review on humanitarian governance, innovation, and digital regulation.
