The House Foreign Affairs Committee (HFAC) announced that BIS Under Secretary Alan Estevez will participate in a hearing on Tuesday morning at 10 AM on “Combatting the Generational Challenge of CCP Aggression.”
The hearing should come as no surprise. Last June, Congressman McCaul told reporters that he planned to “focus like a laser on export control issues” once he became Chairman, adding that BIS “puts too much emphasis on industry and very little if nothing on security and that has to change.”
Given his national security background, which is much needed at BIS at a time like this, China Tech Threat supported a vote for Mr. Estevez in the lead up to his March 2022 confirmation. We also applauded BIS’s export control announcement from October, signaling a new era of enforcement, and its eventual Entity Listing of Chinese chipmaker YMTC in December.
While there is reason to be optimistic, Chairman McCaul is right to agitate for more and quicker BIS action, so today we suggest five questions that the HFAC may want to pose to Under Secretary Estevez:
1. Are export controls on SMIC achieving their goals? If not, what do you plan to do about it?
Background: Chairman McCaul told China Tech Threat: “Senator Rubio and I sent a letter to Secretary Ross in December 2020 describing the SMIC licensing policy as ‘utterly ineffective.’ As currently written, the SMIC licensing policy appears designed to give the company access to nearly all the semiconductor manufacturing equipment, technologies, and other goods it needs to make semiconductors.” Unfortunately, Chairman McCaul’s concerns were recently justified when Chinese-military tied SMIC recorded record revenue, said it’s moving forward with expansion plans, and is doubling down on mature chips.
2. YMTC and CXMT round out China’s chip heavyweights, alongside SMIC. Yet they are all subject to different levels of export controls, and CXMT in particular seems to be flying under the radar. Why is that?
Background: SMIC was first to the Entity List, then YMTC, and so far, nothing for CXMT. By putting the “presumption of denial” on YMTC, BIS suggested a new standard for Chinese companies – a standard that has not yet been applied to SMIC. Like the others, CXMT is a PRC national champion with scores of connections to Entity Listed investors and R & D partners. As one research report summarized, “CXMT is to DRAM what YMTC is to flash memory chips.” CXMT needs to be on BIS’s radar for action, and in the same vein as YMTC.
3. Legacy chips are essential, and the PRC knows it. From a U.S. policy standpoint, why does the focus seem to be on leading edge chips? Aren’t we setting up the PRC for success if we’re too narrow in our thinking?
Background: Leading edge chips are important, but every chip counts. Legacy chips are found in nearly every electronic item, and the auto and defense sectors live and die by their availability. By issuing restrictions exclusively designed to block China’s leading edge capabilities, we’re giving China an opportunity to dominate the legacy chip market by flooding it with its own subsidized chips. That scenario is violently detrimental to American economic and national security.
4. Trust is essential. We know we can’t trust China, so can you confidently say that our technologies are not falling into the wrong hands?
Background: In the wake of BIS’s October 7 export control announcement, China Tech Threat outlined five areas to watch, including a loophole that doesn’t account for companies with a Chinese ultimate beneficial owner. PLA-tied semiconductor companies and others can circumvent the rules by re-reincorporating in a jurisdiction outside China. Additionally, the Wall Street Journal recently reported on American chips being used in China’s nuclear program, despite export controls designed to prevent that occurrence. What is BIS doing to make sure that export controls currently on the books actually work?
5. Can BIS help restrict U.S. states from purchasing risky PRC-connected technology?
Background: Last week, China Tech Threat published a report demonstrating how 28 U.S. states have recently purchased technology from Chinese-owned manufacturers previously restricted by the Pentagon and intelligence agencies. For example, we determined that state agencies including the Arizona Board of Fingerprinting, Massachusetts Department of Homeland Security, Delaware Department of Elections, and the Kentucky State Police have all used this equipment. Read more at: www.StatesStopChinaTech.com
We look forward to hearing from Chairman McCaul, Under Secretary Estevez, the other panelists and members of the House Foreign Affairs Committee on Tuesday.