SK Hynix’s proposed purchase of Intel’s NAND memory chip division could create another avenue for the Chinese government to steal American-made technology. Now, the U.S. Treasury Department should direct the Committee on Foreign Investment in the United States (CFIUS) to revisit Intel’s sale.
Memory chips are a bedrock component to operate sophisticated networks, like defense systems. Much of this technology was developed by U.S. companies, and for decades the United States has enjoyed a competitive advantage in semiconductor design and manufacturing. But as the Chinese government has worked to accelerate its indigenous capabilities, often illicitly, America’s lead has narrowed. Policymakers should examine the CFIUS avenue and other instruments to review and potentially limit some or all sensitive IP to be transferred.
CTT Blog: Chinese Conditions on SK Hynix-Intel Deal Demands CFIUS Re-Review
Thousands of words have been spilled by China Tech Threat and our allies demonstrating that semiconductor design and manufacture are among the U.S.’ most important strategic assets.
The National Counterintelligence and Security Center recently reaffirmed this by identifying semiconductors as one of five “technologies that may determine whether America remains the world’s leading superpower or is eclipsed by strategic competitors in the next few years.” (See the NCSC fact sheet here.)
Accordingly, no one was surprised when CFIUS reviewed the sale of Intel’s NAND memory and storage unit to South Korean-based SK Hynix.
CTT Blog: The 30 Year Step-by-Step US-to-China Semiconductor Tech Transfer
“What we have seen in the last 30 years is step by step, the design, the manufacture and the selling of these products [semiconductors and semiconductor equipment] is moving to China,” noted Jeff Ferry, Chief Economist at the Coalition for a Prosperous America. “At some point, on the military side, they will be better than us if this trend continues.”
“We’ve got to draw a line in the sand somewhere and say, Stop, no more shifting all of our technology,” Mr. Ferry added. “This is a great moment to say… Intel and SK Hynix cannot agree to this deal unless it is very clear they are committing themselves as corporations not to forcibly transfer technology to China and create a competitor to themselves.”
Nazak Nikakhtar, who served as Assistant Secretary for Industry and Analysis at the U.S. Department of Commerce’s International Trade Administration, agreed.
CTT Blog: How CFIUS Can Reconsider the Acquisition?
Last month China’s anti-trust regulator, the State Administration of Market Regulation (SAMR), granted its approval for SK Hynix to purchase Intel’s NAND memory chip business. Unlike authorizations offered by other countries that had to okay the deal, however, SAMR approved the terms with six stipulations, including that SK Hynix “help a third-party competitor enter the… markets.”
While such conditions are not unheard of, a growing field of experts has called on CFIUS to re-review the transaction, which could now enable technology transfers to the Chinese government. But does CFIUS have the authority to do so?
Event: CTT Quick Cut: Does the SK Hynix Deal Pose a National Security Risk?
China Tech Threat hosted an expert panel where participants roundly supported expanding the re-review of the deal:
In the News
CFIUS Should Revisit Intel-SK Hynix Merger Given China’s ‘3rd Party’ Remedyant To Restrict Risky Products
China’s antitrust regulator recently approved the divestiture of Intel Corp’s NAND flash memory arm to South Korea’s SK Hynix. Conditioning its approval for the $9 billion transaction are half a dozen remedies, including a promise from both parties to “help a third-party competitor enter the PCIe enterprise-class solid-state drive and SATA enterprise-class solid-state drive market to strengthen competition in the domestic market.”
Intel Memory Deal Must be Re-examined for China Tech Tranfer Threat
Last year, America’s largest chipmaker, Intel, agreed to sell its memory chip business to South Korean memory chipmaker SK Hynix for $9 billion, part of the routine musical chairs of tech companies repositioning their assets. But in the past month, disturbing reports have emerged that China may be imposing forced technology transfer on these companies as the price of deal approval. The U.S. government should take action to block such conditions and ensure they will not be imposed in the future. It is time to draw a line in the sand against forced Chinese technology transfer.