Three years after Lam Research opened a training center in China to provide customers with “technical guidance and training,” the American semiconductor manufacturing equipment (SME) maker is seeking an engineer dedicated to supporting Yangtze Memory Technologies Company (YMTC).
YMTC, a Chinese “state champion” chipmaker, has emerged as a key player in the People’s Republic of China’s (PRC) bid to dominate the memory market. The White House’s supply chain review report last year notes that YMTC has received an estimated $24 billion in government subsidies and represents a “potential low-cost threat to U.S.-based memory companies.”
Last year James Mulvenon, Director of Intelligence Integration for SOS International, issued a report that details the PRC’s use of subsidies, espionage, and anticompetitive and illegal practices to support YMTC. The report also points out the company’s ownership, Tsinghua Unigroup, which since filed for bankruptcy, supplies the Chinese military.
“This development model precisely mirrors the rise of Huawei, which used similar ‘national champion’ advantages, along with the benefit of state-sponsored cyber espionage, to steal the intellectual property of its competitors, driving competitors out of the market, and assuming a dominant market position,” Mulvenon wrote.
Congressman Michael McCaul and Senator Bill Hagerty urged U.S. Commerce Secretary Gina Raimondo to add YMTC to the Entity List last year because of the company’s ties to the Chinese military.
Citing evidence that links “YMTC to the CCP military, the Party-state, and a national semiconductor plan designed to deplete the U.S. defense industrial base,” the lawmakers called on Commerce Secretary Gina Raimondo to “prevent YMTC from obtaining the technology it needs to continue engaging in activities contrary to our national security.”
Yet, U.S. semiconductor toolmakers continue to generate huge profits from sales to Chinese companies. According to an analysis by Robert Castellano for Seeking Alpha, Lam Research and Applied Materials – also an American company – made $6.2 billion from sales to Chinese memory chipmakers in 2020, including $740 million from YMTC. Mr. Castellano notes that YMTC’s SME purchases tripled in the first quarter of 2021 compared to Q4 of 2020.
Experts have cautioned SME is one of the few chokepoints to protect the United States’ competitive advantage in chip design and manufacturing and therefore warrants tougher trade restrictions.
“There’s a case to be made at least for unilateral controls when it comes to YMTC specifically,” Will Hunt, a research analyst at Georgetown University’s Center for Security and Emerging Technology, told China Tech Threat last year. “YMTC does actually rely on tools that only the United States can make. So, we don’t actually need, in this particular case, multilateral controls… YMTC does have strong ties to the Chinese military, so there is certainly a strict national security argument for placing them on the Entity List.”
Despite U.S. SME makers’ short-term profits sacrificing long-term American interests, as Representative McCaul put it, Lam Research’s recent job posting suggests it has no problem getting into business with a leader in the PRC’s bid to surpass the United States in the semiconductor industry.
Expecting semiconductor toolmakers to govern themselves is like trusting a fox to guard the henhouse. The U.S. government must restrict SME sales to the PRC’s national champions, like YMTC, if it hopes to protect our competitive advantage in this critical field.