While SMIC and Huawei actions have an impact on tech trade, there are also challenges from bipartisan restrictions around the 2018 Export Controls Reform Act, which will take time. To address investor questions, we describe ramifications of a potential full restriction on semiconductor capital equipment.

While entity list issues around Huawei and potentially SMIC have had a nearterm impact, the traditional legislative process around the Export Controls Reform Act (ECRA) of 2018 will also be important to monitor. The Export Controls Reform Act (ECRA) was signed into law in 2018; as part of that action, the Commerce Department was mandated to go through a research period looking at implementing a broader set of advanced rules. There was a comment period for advanced rule-making for emerging technologies in late 2018. A little over a week ago, we entered into a 60-day similar comment period for fundamental technologies; in that request for comments, there was a specific reference for the need to focus on semiconductor capital equipment as an area that could require additional oversight or export restrictions.

The ECRA issue has distinct differences from the recent entity list actions: 1) unlike the recent Commerce Department initiated actions, it will likely take a year or two to become a new set of rules, 2) the scope of those rules could affect all companies, not one company at a time being added to the entity list, and 3) this is an issue with demonstrable bipartisan support in the Senate, meaning that it will likely move forward regardless of election outcomes. What form those new rules could take remains uncertain.