When Xiao Wang got a job offer last year from the US unit of ASML, a Dutch company in the semiconductor industry, he did not expect US-China trade tensions to end this new chapter in his career before it started. Wang, a Chinese national living in the United States for eight years, was working for a mechanical equipment manufacturer in Connecticut at the time. He learned about the recruitment drive at ASML, which has a research unit in Connecticut, from social media posts, including some by Chinese employees of the company. Hoping to gain more professional experience, Wang applied, and had a good interview. When ASML offered him the job in February, he accepted. Before he could start, though, ASML, following the normal procedure, applied to the US Department of Commerce for a “deemed export” licence for Wang. The licence, which allows access to technology that is otherwise restricted, is required for a non-US national to take a job with national security sensitivity in the US. But after more than three months, Wang learned that his application had been rejected. The denial, in June, came as the US and China had reached an impasse in trade talks and were edging closer to a tariff war. US concerns about China’s intellectual property thefts, cyberespionage, market barriers and lack of investment reciprocity were sticking points, and Washington is filled with rising fears about Chinese access to US high technology. Wang’s plans to advance his career in the semi-conductor industry were collateral damage. “It shouldn’t have been a problem to obtain the licence. There are Chinese employees working there,” Wang told the South China Morning Post. “My friends and I talked about the US-China trade war, but I hadn’t expected that such a thing would happen to me.” While recent data is hard to come by, according to official government statistics and industry analysts, Wang’s predicament is becoming more prevalent. Certainly the issues right now in the US-China trade relations are not helping at all International export-control lawyer Doug Jacobson According to US Department of Commerce statistics from 2013 to 2017, Chinese nationals are usually granted more than half the “deemed export” licences the department issues each year. In 2016, it approved 809 deemed export licenses to Chinese out of a total of 1,388 approved. In 2017, the department granted 781 to Chinese of a total of 1,406 approved. The department has yet to release the data for 2018 due to the recently ended government shutdown. The Commerce Department does not publish its approval ratio, nor does it discuss reasons for denying applications. It did not reply to Post requests for comment. Even so, industry analysts warn, it will be more challenging for Chinese to obtain the licences in the months ahead. Perceived bias and dearth of jobs have Chinese science students in US mulling options Doug Jacobson, an international export-control lawyer in Washington, said deemed export licences were reviewed “case by case”, and a decision of an approval or a denial depended on a person’s background, work experience and the nature of the technology. Still, he noted, Chinese nationals were expected to “get extra scrutiny” amid the fractious trade relations between the US and China. “Each of these types of decisions with regard to the deemed export licence for a transfer of technology to a non-US person in the United States or outside US, those are always given a great deal of scrutiny and certainly the issues right now in the US-China trade relations are not helping at all,” Jacobson said. “It makes a big difference not only in the background but also the jobs they are going to be doing and how much technology they are going to have access to.” The US has labelled China and Russia as its strategic competitors, and there is a strong bipartisan belief in Washington that China poses a long-term challenge to US technological dominance. Like administrations before it, the Trump administration has accused China of stealing trade secrets via cyberespionage and other forms of intellectual property thefts. Obtaining licences when hiring [Chinese] personnel would present a tremendous burden for small, high-growth start-ups that often build teams by attracting the best and brightest from foreign countries US National Venture Capital Association But the Trump administration has gone further, raising bars against Chinese access to the US hi-tech market. Since late 2017, the government expanded the authority of the Committee on Foreign Investment in the United States to review a broader range of business deals based on national security concerns. And in August, the US furthered its regulatory grip, passing the Export Control Reform Act. Under the new law, the Commerce Department is developing a list, to be released this summer, of technologies considered key to US national security and thus subject to tighter export controls. Dan Wang, a technology analyst with Gavekal Dragonomics, a research firm that focuses on China, wrote a report that concluded that the greater the number of technologies listed, the greater the impact on the workforce of the US tech sector. Hi-tech researchers ‘told not to travel to US unless it’s essential’ “Affected technology companies would have to do one of three things: move their Chinese national employees off the teams working on those technologies; obtain licences from the Department of Commerce to enable these employees to continue their work; or terminate these employees,” he wrote. “To comply with tighter export controls, both companies and university labs will need to start segmenting what their US and non-US personnel can work on, and will need to figure out how to handle previously routine exchanges of information and technology between US facilities and foreign subsidiaries,” he said in the report. But such arrangements are easier said than done and could hobble some technologically innovative companies. “Obtaining licences when hiring such personnel would present a tremendous burden for small, high-growth start-ups that often build teams by attracting the best and brightest from foreign countries,” the US National Venture Capital Association, which calls itself “the voice of the US venture capital and start-up community”, said earlier this year. ASML, headquartered in Veldhoven, Netherlands, is the world’s largest supplier of photolithography systems for the semiconductor industry. Its clients include the chip makers Intel, Samsung and TSMC (Taiwan Semiconductor Manufacturing Company). The company’s core products are hi-tech hardware and advanced software that help users control the shape and size of their chip patterns. ASML reported a record net sales of US$12.4 billion in 2018 and said that demand from China had remained strong. Even if a deal is struck on tariffs, tighter export controls are on the way. And the pain could spread to US and other non-Chinese tech companies Dan Wang, technology analyst with Gavekal Dragonomics In an email response to the Post , ASML said it was “a hi-tech, knowledge-intensive company” and it did not “restrict hiring any nationality”. “We believe diversity strengthens our ability to innovate and welcome engineers from all over the world. The export licence requirement is not new. ASML can hire and is still hiring Chinese nationals,” the company said. US tech supremacy at stake if China gains 5G lead, Congress is told In its trade talks with the US, China initially demanded that the US ease the export control, but people briefed on the talks ruled out the possibility that the US would agree. It is unclear whether China raised the proposal in the latest round of talks last month in Washington. Though Beijing and Washington appear closer to a deal to end the months-old trade war, analysts and executives with multinational corporations with operations in China warn that the technology sector will continue to draw fire. “Even if the Trump administration is not in office two years from now, I still think this tension will continue into any administration, whether it is a Democratic or Republican administration,” Jacobson said. “The difficulty is many US companies that develop these technologies want to produce in China, and that’s the challenge. “So it is a bit of a symbiotic relationship: both countries need each other, but striking the right balance is very difficult and the balance has tilted away, making it harder for the technology transfers to take place.” Wang of Gavekal Dragonomics said the Commerce Department was preparing more aggressive export controls to deny Chinese firms access to key US technologies and to untangle the two nations’ tech sectors. “Even if a deal is struck on tariffs, tighter export controls are on the way. And the pain could spread to US and other non-Chinese tech companies,” he said. James Lewis, a senior vice-president at the Centre for Strategic and International Studies, concluded in a report to the Commerce Department in January that Chinese studying or working in the US were a source of technology leakage – but that the US gained more than it lost. Trade-war suspicions have chilling effect on Thousand Talents Plan He said the risk for skills transfer and IP theft existed, but that “export controls are not the best way to mitigate this risk”. “The goal is not to defeat or contain China, but to bring its practices in line with international expectations in ways that allow commercial relationships to continue without risk to national security,” Lewis said. After ASML notified him that he would not be getting a licence – and thus not be getting hired – it took Xiao Wang several months to find an engineering job that did not require a deemed export licence. Finally, in October, he accepted work at a computer hardware company in another state. Out of caution, he declined to reveal the name of the company. Wang said he did not blame ASML, but called the US policy unreasonable. “If the US government feels an industry is sensitive and matters to national security, why doesn’t it just ask those companies to stop recruiting foreigners?” he asked.