CXMT’s Inclusion in Section 889 Amendment Shows It’s a Growing Threat

As Roslyn Layton writes in her latest column for Forbes, a battle is raging in Washington, with concerned national security experts and bipartisan legislators on one side and K Street on the other.

The U.S. Congress is currently crafting this year’s National Defense Authorization Act (NDAA) – the mammoth yearly bill that provides for America’s national defense. Senators Chuck Schumer and John Cornyn are leading the charge to expand a provision of the NDAA, Section 889, to ban the federal government from using chips from leading Chinese chipmakers SMIC, YMTC, and CXMT.

It’s worth noting that in addition to calling for a ban on products made with chips made by SMIC and YMTC – both companies with known ties to the Chinese military – the proposed revision to Section 889 also calls for keeping technologies made by CXMT out of federal government systems, and those of federal contractors. Compared to YMTC and SMIC, CXMT has seemingly been more under the radar, but as CTT has said, CXMT is “the most dangerous Chinese company you haven’t heard of.”

Like YMTC and SMIC, CXMT is awash in Chinese subsidies. The company’s strategy relies on IP theft to close ground against competitors. It also has multiple business leaders also serving in important Communist Party roles and connections to the PLA. Cyber expert Mark Montgomery of the Foundation for Defense of Democracies has said “that there is high confidence that CXMT is fully integrated into the Chinese military and surveillance apparatus.”  

Keeping SMIC, YMTC, CXMT, and other Chinese entities away from the Pentagon’s systems sounds like a no-brainer move. But for major American tech companies, national security is getting in the way of profits. To quote Roslyn Layton:

Predictably, this has angered American companies which make money from supplying Uncle Sam. Just as American semiconductor manufacturing equipment firms have begged the Commerce Department not to take action against Chinese chipmakers such as YMTC, Congress is likewise besieged by lobbyists from well-known tech companies trying to kill the expansion of Section 889.

Blacklisting CXMT from the federal government’s systems is a step in the right direction. But the executive branch needs to keep up with Capitol Hill and deal the company a blow of its own. The Commerce Department shouldn’t make the same mistake it did with YMTC and dither on restrictions while the company achieves technological breakthroughs. In 2020, Commerce placed SMIC on the Entity List. YMTC seems headed there after being placed on the Unverified List on October 7. With a consensus emerging about the threat CXMT poses, the company should be the Commerce Department’s next target.