Failed Export Controls One Year Later, Blacklisted Chinese Chipmaker’s Thriving U.S. Business, PRC-Controlled Lenovo Sold on Navy Bases

WSJ: “Blacklisted Chinese Chip Maker Does A Thriving Business With U.S.” Just days before the first anniversary of sweeping new export controls announced by the Biden Administration, a Wall Street Journal story on blacklisted Semiconductor Manufacturing International Corp (SMIC)’s “thriving business” with the U.S. raises questions if the restrictions are “tough enough.” The story features SMIC’s $1.5 billion in 2022 revenue from American semiconductor-design companies and why members of Congress argue that allowing SMIC access to American technology could give China’s military capabilities to fight the U.S. and its allies. The story quotes from a new report by China technology analyst James Mulvenon, who authored the 2020 report that promoted the U.S. to put SMIC on the blacklist: “It is not an exaggeration to predict that allowing SMIC to remain highly profitable and heavily engaged in cutting-edge R&D over the coming years could materially alter the odds that the U.S. prevails in a hypothetical military conflict with China.”

Export Control Anniversary Let Down: In advance of the one-year anniversary of long-awaited export controls targeting the Chinese chip sector, China Tech Threat offers a discouraging assessment: “But, one year in, it is now evident that these restrictions have not been adequate to stop China from making major chip advances or positioning itself to dominate the global semiconductor space.” The long-anticipated restrictions have also pushed Chinese companies to focus on legacy chips as technology analyst Dan Wang warned in the New York Times , “…a world in which Chinese companies dominate the production of mature chips — driven directly by American policy — hardly looks like a victorious outcome for the United States.”   

CTT-CPA “Cash Over Country” Report Exposes Three U.S. Toolmakers Boosting Dangerous Chinese Legacy Chipmakers.Three American semiconductor equipment manufacturing companies are earning billions from Chinese legacy chip manufacturers while undermining American national and economic security. Co-authored by Coalition for a Prosperous America Chief Economist Jeff Ferry and CTT co-founder Roslyn Layton, their latest joint report uses public data to reveal how American semiconductor equipment manufacturers (SEMs) Applied Materials, KLA, and Lam Research have grown their combined revenues from China by 103% between 2018 and 2022 by lobbying the U.S. government to permit them to sell some of the world’s most complex technology to Chinese government-aligned firms making legacy chips.

Save The Date: Cash Over Country Event To Examine How America’s Export Control Regime Failing To Prevent China Semiconductor Dominance. On Tuesday, October 17, CPA and CTT will host a panel discussion on Capitol Hill to discuss the Biden Administration’s export controls targeting China’s advanced chip sector, which were lauded when announced one year ago, but have allowed the rise of China’s legacy segment as a consequence. CTT Co-Founder Dr. Roslyn Layton, CPA Chief Economist Jeff Ferry, former Commerce Department Assistant Secretary for Industry & Analysis Nazak Nikakhtar, and former Defense Technology Security Administration Senior Advisor Steve Coonen will examine why America’s current approach to export controls clearly isn’t working and how Congress can use its oversight of the Commerce Department’s export control regime to better protect our national and economic security interests. Click here for event details and to RSVP. 

Chinese-Owned Tech Sold On U.S. Navy Bases Despite Being Restricted By DOD. At the end of September, CTT released a policy memo examining how companies substantially owned by Chinese entities like Lenovo, Lexmark, Hikvision and DJI, have effectively deployed their products inside the Department of Defense. Now, Chairman Mike Gallagher of the House Select Committee on the Chinese Communist Party has written to the CEO of the U.S. Navy Exchange requesting the removal of CCP-linked Lenovo products from the discounted marketplace available to servicemembers. The CTT memo was spurred by evidence that the U.S. Navy continues to maintain a relationship with Lenovo, even serving as an official sponsor to sell its products through the Navy Exchange. Despite the known risks presented by Chinese technology companies, state and federal government agencies have continued to have relationships with dangerous Chinese owned and operated companies. The memo lists four recommendations to fix the vulnerability. 

SIREN: World Increasingly At Risk Of Relying On China For Legacy Chip Needs.Don’t just rely on CTT’s repeated warnings, a compilation of recent headlines tells the story of China’s march to obtain total self-sufficiency in semiconductors. There were the September news reports on Huawei’s new phone with a 7nm chip made by SMIC – a technological breakthrough that caught many by surprise given our export controls on Entity Listed SMIC and Huawei. CNBC reported that revenue from China’s top chip equipment makers surged in the first half of the year. And Arrian Ebrahmi reported in The Diplomat that China is boosting the country’s tax credit for investments in semiconductor research and development by 20% – further incentivizing Chinese firms to help build an indigenous Chinese chip industry.