The Biden administration is backing down from its stated goal of curtailing the expansion of semiconductor manufacturing in China.

Chip manufacturers from South Korea and Taiwan, two of America’s most important allies in the region, will not be sanctioned for investing billions of dollars in building new semiconductor plants and expanding existing ones in China, according to a report from the Wall Street Journal (WSJ).

Initially, the Biden administration had provided a one-year exemption to its policy restricting Asian firms from investing in China. Following pressure from manufacturers, however, the administration plans to extend that exemption for another year, according to remarks by under secretary of commerce for industry and security Alan Estevez.

Security experts have argued that the expansion of semiconductor manufacturing in China undercuts American national security interests, allowing the Chinese to develop advanced weapons systems. South Korea and Taiwan are largely reliant on the United States for security, though they also have substantial economic ties to China.

America has leverage over Taiwanese and South Korean manufacturers, as their operations rely on goods produced by American firms. Pressure from business interests, as well as European and Asian governments, however, appears to have caused the Biden administration to retreat in its efforts to limit Chinese access to semiconductor technology and manufacturing capacity.

Derek Scissors, a senior fellow at the American Enterprise Institute, told WSJ that allowing a small number of companies to do as they please makes it difficult for the Biden administration to prevent China from growing its semiconductor industry. Scissors went on to say the United States looks “very weak” as a result of its inability to exert influence.

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