The U.S. government on Tuesday intensified restrictions on chip exports to China, a move that the American semiconductor industry has been strongly lobbying against for fear of market uncertainty.
The new rules are an update to the export controls imposed by the U.S. Commerce Department a year ago to stop China from acquiring advanced computer chips and the equipment to manufacture them.
Tuesday's rules broaden the controls by including slightly less powerful chips than those covered under the previous rules and expand the previous list of manufacturing equipment.
The goal is to limit China's "access to advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers", Commerce Secretary Gina Raimondo told reporters on Tuesday.
The Semiconductor Industry Association, which represents 99 percent of the U.S. semiconductor industry by revenue, criticized the rules in a statement on Tuesday.
"Overly broad, unilateral controls risk harming the U.S. semiconductor ecosystem without advancing national security as they encourage overseas customers to look elsewhere," the group said.
The U.S. has long sought to limit the development of China's semiconductor industry by placing Chinese companies on an "entity list", which requires U.S. companies to obtain licenses for exports of advanced technologies to China.
Last year's rules expanded the controls by including exports of crucial cutting-edge chips and equipment that are manufactured with U.S. technology.
The revised rules further expand the U.S. government's authority to determine what products the U.S. companies can and can't sell in the name of national security.
Under the new rules, chip companies are required to notify the government when they export chips with performance just below the restricted threshold.
The government also expands its export restrictions to include additional countries and overseas subsidiaries of Chinese companies to prevent "circumvention of the controls".
The new rules come after U.S. chip companies and their trade group continue to push the government to "refrain from further restrictions" when media reports said the administration was considering tightening export controls on China in July.
The CEOs of major U.S. chip companies Nvidia, Qualcomm and Intel visited Washington in July to voice their concerns on the export controls, as China is not just the world's largest chip market but also a key link in U.S. chip companies' supply chains.
The U.S.-based Semiconductor Industry Association also warned of "diminished competitiveness, supply chain disruptions and significant market uncertainty".
Despite their strong opposition, President Joe Biden signed an executive order in August that restricts private investments into Chinese companies in the semiconductor, AI and quantum computing industries.
Following the announcement of the new rules, shares of leading chip companies, such as Nvidia, Advanced Micro Devices and Intel all declined on Tuesday.
Nvidia, which has previously said that 25 percent of its data-center chip revenues come from China, is expected to take the hardest hit.
The company designed new versions of chips that are under the performance threshold of the previous rules, so it has been able to sell those chips to China. But Tuesday's rules would be a blow to the company.
Nvidia Chief Financial Officer Colette Kress said in June that long-term restrictions on China "will result in a permanent loss of opportunities for the U.S. industry to compete" and "the impact on our future business and financial results is there".