New CTT Paper: Three Solutions for Confronting the Looming Chinese Legacy Chip Monopoly

Yesterday China Tech Threat released a new paper detailing the dangers a looming Chinese legacy chip monopoly poses to U.S. national security and economic competitiveness.  In essence, With the U.S. government exclusively targeting China’s advanced chip manufacturing sector, the People’s Republic of China (PRC) – led by SMIC, its national champion working with the Chinese military – is exploiting the U.S. government’s tunnel vision and spending billions to dominate legacy chip manufacturing.

CTT also wrote a brief summary  yesterday of three major dangers:

  1. The U.S. would potentially be dependent on China for chips essential to various military technologies and critical infrastructure.

  2. The world would be re-exposed to supply chain vulnerabilities associated with China-based chip production.

  3. The Chinese Communist Party would have more new conduits for spying on, hacking, and stealing from targets in the West.

The good news is that the U.S. government has three major tools with which it mitigate these threats:

  1. Impose meaningful export controls targeting SMIC and other PRC legacy chipmakers: The Commerce Department’s Bureau of Industry and Security (BIS) must tighten export controls on SMIC and other Chinese chipmakers. It must apply the presumption of denial standard to ensure they cannot leverage American technologies to support the Chinese military and/or control the global legacy chip market. A Chinese military company identified as a national security threat by the U.S. government should not benefit from a lax BIS licensing policy.

  2. Strengthen Section 5949 of the NDAA: Congress should strengthen Section 5949 of the FY 2023 NDAA to make sure contractors servicing the federal government cannot use Chinese chips in their equipment. Congress should also amend Section 5949 to prohibit chips made by PRC-owned and operated companies in U.S. critical infrastructure.

  3. Leverage tariffs to protect U.S. capacity: The U.S. Trade Representative should impose tariffs to respond to China’s predatory practices and defend American national security. Section 301 of the Trade Act of 1974 provides the federal government with the authorities to defend American prosperity and national security. Senator Tom Cotton of Arkansas has likewise called for a precise application of tariffs, which would be useful in heading off a Chinese effort to dump a glut of legacy chips into the global market.

Legacy chips are already found in virtually every electronic device. With the 5G-Internet of Things era upon us, their presence is only going to expand. China is positioning itself to dominate this crucial technological battleground, just as it is doing with virtually every other technology.

The time is now for American policymakers to defend American national and economic security. Visit EveryChipMatters.com to learn more.