The US House of Representatives’ bipartisan select committee on China has recently released a 741-page annual report that detailed the aggressive acquisitions by Chinese companies of US chipmaking equipment to produce advanced semiconductors. These actions are in violation of new US export restrictions intended to slow China’s semiconductor industry.
The Joe Biden administration had imposed restrictions on the exports of 14-nanometer or below semiconductor chipmaking equipment to China back in October 2022. However, it appears that the Commerce Department’s 14-nanometer limit has created a significant loophole, making it difficult for authorities to verify whether the equipment is being used for more sophisticated chip manufacture, as importers typically declare it’s meant for older production lines.
According to Reuters, a source has disclosed that the US government is struggling to prevent Huawei, a massive Chinese telecom company, from having its advanced 7-nanometer chip manufactured at SMIC, China’s top chipmaker. Despite trade restrictions imposed on Huawei and SMIC in 2019 and 2020, they managed to circumvent them, casting doubt on the effectiveness of US export laws.
The report also reveals that China used a time lapse between the US laws in October 2022 and similar steps by Japan and the Netherlands in July and September 2023 to stockpile equipment.
China’s imports of chip-manufacturing machinery from the Netherlands surged by an impressive 96.1% between January and August of 2023, totaling $3.2 billion, up from $1.7 billion during the same period in 2022. During the first eight months of 2023, China’s total imports of semiconductor equipment from all nations amounted to $13.8 billion.
Despite these findings, the Congressional report does not offer solutions to US law deficiencies. It instead calls for the US Congress to order a yearly review of the General Accountability Office’s assessment of the efficacy of export restrictions on chip-making machinery to China.
Last month, the Biden administration declared its intention to stop sending cutting-edge AI chips and chip-making equipment, such as Nvidia’s, to China. Commerce Department Secretary Gina Raimondo made it clear that the goal of the import limits on sophisticated semiconductors is not to damage the Chinese economy, but rather to limit China’s gains in AI and military technologies.
It is evident that the US is facing significant challenges in effectively imposing restrictions on Chinese companies and addressing the shortcomings in export laws, as highlighted in the Congressional report.
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