More U.S. Pressure Coming on YMTC – Will American Allies Join In?

YMTC is firmly in the crosshairs of both the executive and legislative branches of the U.S. government. Will the desire to stop one of the world’s most dangerous companies go international?

Ever since the Biden Administration unleashed a new round of export controls targeting the Chinese semiconductor chip industry on October 7, Chinese firms have been buckling under the weight of the new restrictions. For example, the South China Morning Post reports that “China’s chip output in October reached 22.5 billion units, down 26.7 per cent from a year ago and the largest single-month decrease on record.”

More actions from the executive branch seem likely. This week, Bureau of Industry and Security Assistant Secretary Matthew Axelrod is quoted by Reuters in saying that companies currently on the Bureau’s Unverified List (UVL), including YMTC, “are now at risk of moving to the Entity List as soon as December 6 … if we are unable to complete an end-use check by then.” (See China Tech Threat’s memo including an analysis of end-use checks here.)

Congress is getting in on the act too, sustaining the recent bipartisan appetite to stop YMTC. Just this week, Politico reported on Senate Majority Leader Chuck Schumer and Senator John Cornyn’s effort to include a provision in this year’s National Defense Authorization Agreement (NDAA) that would block the federal government from purchasing any products which use China-manufactured semiconductors. That would include those made by SMIC, YMTC, and CXMT.

The Schumer-Cornyn provision also encourages federal contractors to keep Chinese chips out of their systems, lest they be ineligible for government contracts. As Maseh Zarif and Mark Montgomery have commented in their analysis of this proposed provision: “This should be a simple choice for companies: you can do business with the federal government or you can have a significant dependence on Chinese chips, but you cannot do both.”

Internationally, the Biden Administration has been pressing U.S. allies to restrict semiconductor-related exports to China. Washington has a powerful card to play if U.S. allies don’t go along. It could halt sales of foreign chip equipment that contain even small amounts of American components. Hopefully it won’t come to that, but national security must take precedence over profits.

Earlier this month, Under Secretary Alan Estevez stated clearly “we are not done” on focusing on the Chinese semiconductor sector. A credible follow through would entail sustaining vigorous pressure on U.S. allies to implement their own set of controls that dovetails with the U.S.’s. After all, their national security is at stake too.

President Xi of China has vowed to “resolutely win the battle in key core technologies.” China has spent years (and billions of dollars) trying to turn YMTC, CXMT, and other chip producers into heavyweights that can put American companies and others out of business. YMTC also supplies the Chinese military and the Chinese oppression-machine surveillance company Hikvision. American leadership in the international arena – even if it means pressure on allies – is key to stop YMTC from proliferating its chips into the free world.