Commerce Department Reportedly Focused on SMIC, But What About YMTC and CXMT?

Reuters reports that the Commerce Department is considering banning exports of chipmaking tools to Chinese factories that make advanced semiconductors at the 14 nanometer node and smaller. This would significantly impact the ability of Chinese military-linked chipmaker SMIC from making the most advanced chips.

The threat of SMIC is already clear. In a widely covered report provided to federal officials, James Mulvenon and his SOSI colleagues determined that SMIC – the largest and most sophisticated Chinese government-owned semiconductor maker – has multiple close ties to the People’s Liberation Army (PLA). Specifically, PLA researchers use SMIC chips and processes, indicating it is tailored for their purposes. For example, radiation hardening – which is used for military and space purposes – employ a SMIC process design kit. Mulvenon’s report helped provide the basis for the Department of Commerce to announce the decision on September 25, 2020 requiring U.S. businesses to obtain licenses before exporting certain technology to SMIC.  

The Commerce Department’s apparent appetite to restrict chipmaking tools for SMIC is a welcome step. But what about other Chinese fabs like YMTC? It shares SMIC’s ties to the PLA and ambitions of dominating a segment of the advanced chip market.

YMTC has also allegedly supplied memory chips to Huawei, which would put it in violation of U.S. export control law. Western companies have belatedly realized the threat of depending on Russian energy supplies. They should not make the same mistake with Huawei, whose products remain in telecommunications networks worldwide. Putting export controls on YMTC could help crush Huawei’s ability to be a surveillance and data theft arm of the Chinese government.

Like YMTC and SMIC, ChangXin Memory Technologies (CXMT) also maintains known ties to the Chinese military. CXMT was founded as a “pilot demonstration” of the Made in China 2025 initiative and enjoys significant support from the Chinese government. Multiple company officers serve in the Chinese Communist Party (CCP). CXMT is also responsible for rampant intellectual property theft. 

Read our full 2022 Future of BIS report on why the U.S. government must strengthen semiconductor manufacturing equipment restrictions.

Last week, Alan Estevez, the head of the Commerce Department’s Bureau of Industry and Security (BIS), told lawmakers:

“We do have some cutoff points at the most sensitive highest tech – semiconductors – the tooling that would make those semiconductors being allowed to be exported to China…I’m conducting a complete review over those policies within BIS right now, and then there’s also an interagency process looking at this. There is a red line on what we would allow the Chinese to access.”

Bureau of Industry and Security (BIS) Under Secretary Alan Estevez

Federal officials reviewing SMIC should also look at fabs like YMTC and CXMT. They need look no further than their ties to the PLA to justify putting them on the Entity List.