China's 'sea turtle' tech executives stranded by U.S. crackdown

TAIPEI -- The latest U.S. crackdown on China's tech has left a group of talented employees caught in the crossfire: the hundreds of Chinese Americans who have been some of the key figures at China's homegrown semiconductor-related companies.

For the first time, U.S. export controls on China have expanded to block "U.S. persons" -- both citizens and permanent residents -- from supporting the "development" or "production" of certain high-end chips that could advance Chinese tech applications from military use and artificial intelligence to supercomputers.

The restriction could bring massive disruption to China's leading chip circles, industry executives and analysts said. Multiple top China-based chip equipment and materials companies have been founded by Chinese Americans who have U.S. citizenship, according to industry executives and public filings, and "hundreds" of executives and professionals at the heart of China's efforts to build a self-reliant chip ecosystem also have U.S. citizenship, people familiar with the matter told Nikkei Asia.

Such senior executives are known as haigui, or "sea turtles" -- a Chinese nickname for returnees who have studied and worked overseas. They have long been viewed as crucial to China's aim of improving its chip and tech sectors, and many have touted their experience working at top U.S. companies like Intel, Applied Materials and Lam Research.

Some renowned examples include founding Chairman and CEO Gerald Yin of Advanced Micro-Fabrication Equipment Inc. China (AMEC), China's leading equipment maker, which aims to break the dominance of U.S. companies in the chipmaking tool sector.

Yin -- described as a U.S. citizen on the company's website and in its filings to the stock exchange -- worked in the U.S. for two decades before he started AMEC in 2004. Many of AMEC's senior executives are also American citizens with long experience working and studying in the U.S., including chief operating officer Du Zhiyou, the company's investor relations website showed. AMEC's shares closed down nearly 20% on Monday, part of a sell-off in China chip stocks following the announcement of the latest U.S. curbs.

Other examples include David H. Wang, CEO and president of ACM Research, China's most advanced maker of wafer cleaning machines. The company website says he is a U.S. citizen.

ACM Research told Nikkei Asia it is still studying the implications of the new rules and declined to comment further.

At least four senior executives at Shanghai-listed chip machine maker Tuojing Technology, also known as Piotech, also have U.S. citizenship.

Chen Lu, the founding chairman and CEO of Skyverse Technology, a key provider of test machines, is another U.S. citizen, according to company's prospectus, as is Wang Sumin, founding chair and CEO of chipmaking chemical maker Anji Microelectronics, public filing records showed. Anji's shares fell 20% on Monday.

AMEC, Skyverse, Piotech and Anji did not respond to Nikkei Asia's request for comments.

People attend a chip industry fair in Shanghai. International ties have been key to the growth of China's semiconductor sector. (Photo by Cheng Ting-Fang)

Over a decade China has strongly encouraged those with special know-how and industry knowledge to return home to teach at top universities or start companies. The "Thousand Talents Plan" initiated by Beijing in 2008 was aimed at bringing back even more overseas talent to help China improve its industries.

However, the U.S. now sees programs like this as an industrial espionage threat.

The latest export controls are Washington's first explicit attempt to stop the sea turtles from helping China develop advanced semiconductors for supercomputers, AI and other key tech applications. Previously, Washington only regulated U.S. persons' activities if they were related to nuclear or chemical and biological weapons programs in China, the export control document said.

"We don't have actual numbers of how many people could fall under the U.S. new regulations this time. But from public information, many key Chinese chip companies are led by Chinese Americans or have several Chinese American senior executives," Donnie Teng, a tech analyst with Nomura Securities, told Nikkei Asia. They "are crucial industry leaders for Chinese semiconductor development and progress."

Mark Li, a semiconductor analyst with Sandford C. Bernstein, said, "It could have a big impact if U.S. talent can't support Chinese chip development."

The new ban takes effect on Wednesday, at which time all activities by these "U.S. persons" related to the development of certain grades of high-end chips must cease until they receive a license, Christopher Timura, a Washington-based lawyer with Gibson, Dunn & Crutcher, told Nikkei Asia.

"This new restriction applies not only to engineers who might be supporting the development and production of the types of targeted ICs, but also to other business personnel because it also extends to U.S. persons that are involved in other business functions such as shipping or transmitting commodities or technologies," Timura said.

Timura added that the restriction applies equally to U.S. expatriates supporting projects and chipmaking facilities located in China and to American companies located in the U.S. He likened it to the curbs on U.S. persons assisting sanctioned countries such as Cuba, Iran and North Korea.

Violators of the licensing requirement can be subject to both civil and criminal penalties, several trade and export control lawyers said.

U.S. citizens become subject to the license requirement as soon as they are aware that American items or technologies will be used to develop or produce high-end chips at a facility in China that makes advanced logic chips, explained Kevin Wolf, a veteran export control lawyer with Akin Gump.

For logic chips -- generally understood to mean processor chips -- the rules cover production technology of the 14-to-16-nanometer grade or better. For NAND flash memory, the cutoff is chips with 128 layers or more, while for DRAM memory it is 18-nm tech or better.

The new regulations hit at the heart of China's chip ambition. Its top chipmakers are ramping up production for chips of those grades. Yangtze Memory has put 128-layer NAND flash memory into production, while ChangXin mass-produces 18-nm grade DRAM. Both companies are developing next-generation memory chips. Chinese chip equipment and materials makers are working to support these expansion programs.

Chinese Americans can try to avoid the latest rules by abandoning their U.S. citizenship or changing the scope of their working areas.

"If such individuals have, in fact, ceased to be U.S. citizens, or no longer have the status of permanent residents and are acting outside the United States, the rules would not apply to them," Harry Clark, a Washington-based lawyer specializing in export control law with Orrick, told Nikkei Asia. "But whether any given such individual has achieved this status (not being a U.S. person) would depend on an assessment under U.S. immigration laws."

It would not be easy for these Chinese Americans to abandon their citizenship overnight, multiple chip industry executives told Nikkei Asia.

"The new regulation caught many of these Chinese American executives off guard. ... Many of them have family overseas in the U.S. and have assets and properties in the U.S.," said one chip industry executive who declined to be named because of the sensitivity of the matter. "It will be very tough for them if the U.S. can really enforce and execute this new regulation."