Estevez Senate Hearing: Mixed Messages on YMTC Continue

Bureau of Industry and Security (BIS) Under Secretary Alan Estevez testified to the Senate Banking Committee on Thursday about issues related to U.S. Export Controls. There is still no clarity what the U.S. government’s stance is on Chinese military-linked chipmaker YMTC.

Senator Mark Warner of Virginia told Estevez that American memory chip manufacturers have complained to him about YMTC’s activities, which he said are “typical of a lot of the new Chinese memory and chip-related firms.” That is to say, they are tied to the Chinese military and benefit from massive subsidies designed to kill off foreign competitors.

Sen. Warner also noted a recent Financial Times story detailing YMTC’s ties to Huawei, the Chinese telecommunications firm on the Commerce Department’s Entity List. If YMTC is in fact found to be supplying Huawei with chips made with help from American tech firms like Lam Research, Applied Materials, and KLA, all of which are acknowledged suppliers of YMTC, then those companies can be held legally responsible for running afoul of U.S. export control law.

Regrettably, Estevez stated, “I cannot talk about YMTC in particular or any entity that might be under investigation…If we find violations we will put companies on the list.”

Estevez’ words do not add clarity to the Commerce Department’s position on YMTC. They follow Sec. Raimondo’s recent public statements, quoted in news reports, that U.S. companies equipping Chinese government-owned and affiliated competitors is “not problematic.” That message conflicts with what American companies are telling Senator Warner. It also goes against the grain of an emerging consensus within the U.S. national security community that was well-summarized in June by Texas Representative Michael McCaul, Chairman of the China Task Force: “​​How are we going to compete against China if we don’t address this very important issue of us exporting our technology that they then use to build their military apparatus?”

“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’s response to a question from Senator Steve Daines of Montana

Even with U.S. government investigations underway, the American people deserve answers on the Commerce Department’s policy on YMTC. That’s why China Tech Threat filed a FOIA request on July 13th asking for records related to Secretary Raimondo’s communications with the CEOs of top U.S. chip machine makers. The Commerce Department should heed Senator Warner’s words on the way forward: “YMTC deserves that investigation, and at the end of the day, a designation.”