US Commerce Department Tightens Control on Chip Exports to China

On 29 September 2025, the Bureau of Industry and Security (BIS) at the US Department of Commerce issued updated regulations regarding chip and chip-making equipment exports to China. Whereas previously, US firms could not export to companies on the ‘Entity List’, now US companies cannot also sell to affiliates that are majority-controlled (>50% shareholding) by companies on the ‘Entity List.’ The ‘BIS Affiliates Rule’ by the Commerce Department is meant to ‘close a significant loophole’ as Chinese companies used subsidiaries to circumvent restrictions.

Several US chip companies, including Applied Materials, Lam Research, would be directly affected. Applied Materials (NSQ: AMAT) issued a warning that it expects a USD 710 million drop in revenue as a consequence of the new tighter rules, as China accounts for more than one-third of Applied Materials’ total sales.

In the past, Applied Materials came under scrutiny for allegedly shipping chip fabrication equipment to Semiconductor Manufacturing International Corporation, a Chinese fab. Apparently, Applied Materials completed this transaction via its South Korean subsidiary, thus bypassing the export licensing control of BIS.

The world’s largest chip-making equipment is ASML, based in the Netherlands, and its advanced ultraviolet lithography has been banned from export to China. The Dutch government has also tightened control on the sale of advanced EUV and DUV equipment to China.

Similarly, Lam Research (LRCX) forecasts a negative impact of USD 300 million on its annual revenue. Milpitas-headquartered KLA also predicts a decrease in revenue, although at a smaller scale.

On the other hand, Nvidia received the green light to export its less powerful AI chips to China. Interestingly, China declined to buy Nvidia’s RTX Pro 6000D and H20 chip, citing and urged its local enterprises to ‘work harder’ to close the technological gap and to achieve self-reliance. Currently, the most advanced #AI GPU from Nvidia are the Blackwell Ultra and H100.