Deck the Halls with China Tech Threat’s Holiday Reading List

Coonen: Defense Spending Increases Will Be Irrelevant If We Don’t Curtail China Acquisition Of U.S. Technology. Following his praise of Congress for increasing defense spending and military capabilities in the Indo-Pacific in the National Defense Authorization Act (NDAA), former Defense Technology Security Administration Senior Advisor and CTT Special Advisor Steve Coonen warns that increased spending could be irrelevant without complimentary export control policies to curtail China’s ability to use U.S. technology against us. Citing Russia’s use of Chinese-made DJI drones that contain American cutting-edge technology, Coonen warns: “Far from dissuading diversion, U.S. export control policies are an open invitation for the Chinese Communist Party to send U.S. technology to whichever end user they desire. In this case, U.S. loopholes are costing Ukrainian lives.” For more informed insights from Coonen on our broken export control system, check out his Willful Blindness column

Caught Red Handed: Applied Materials Allegedly Illegally Exporting Tech To China. Reports that the U.S. Justice Department is investigating Applied Materials for allegedly selling hundreds of millions of dollars’ worth of equipment to China in violation of U.S. export controls is bad news on many levels CTT warned in a blog. If true, the allegations expose the porousness of the U.S. export control regime and prompt the question: How many other U.S. companies are pulling off similar schemes? The potential answer is concerning enough without factoring in the sensitive technologies that continue to flow to SMIC and other Chinese semiconductor makers legally CTT writes. 

Top U.S. SME Manufacturer Revenues Show Export Controls Aren’t Working. Quarterly results released by LAM Research, a top U.S. semiconductor manufacturing equipment manufacturer, reveal China is its largest revenue contributor. The revenue numbers show the weakness of U.S. export controls, a fact underscored by LAM CEO Tim Archer on the company earnings call. “We’ve reviewed the regulations and our early assessment is we don’t see any materially impactful forecasts in business … I see a level of sustainability in China as we go into next year and frankly beyond. They have long-term objectives.”

USCC Report Underscores Risks From China’s Legacy Chip Sector. The U.S.-China Economic and Security Review Commission’s 2023 annual report to Congress notably grasps that legacy chips should be considered as part of the U.S.-China national and economic security equation. “[China] is evidently betting that massive, state-directed investments and continued access to foreign technology can help it to achieve the breakthroughs it needs to boost productivity and maintain growth” the USCC commissioners wrote in their report. The report is an important development following CTT’s Every Chip Matters paper.

Kudos To Secretary Raimondo For Prioritizing U.S. Legacy Chip Production With CHIPS Act Grant. CTT gives credit where credit is due in a blog praising the U.S. Commerce Department’s decision to use the first CHIPS Act grant to support U.S. legacy chip production. On December 11, the Commerce Department announced that a U.S. subsidiary of BAE Systems would receive $35 million “to support the modernization of the company’s Microelectronics Center, a mature-node production facility in Nashua, New Hampshire.” CTT lists three reasons why the announcement is important: 1) It signals to the rest of the U.S. government and the semiconductor supply ecosystem that a trusted supply of all chips MATTERS – not just advanced chips; 2) It will further support the production of critical defense chips inside the U.S.; and 3) It keeps national security at the core of the CHIPS Act.