China Inches Closer to Legacy Chip Dominance – Will the U.S. Government Act Fast and Strong Enough? 

A collection of recent headlines reinforces what China Tech Threat has been warning about for months – that the world is increasingly at risk of relying on China for its legacy semiconductor needs.The news tells the story of China’s march to obtain total self-sufficiency in semiconductors. This month the world saw Huawei unveil a phone with a 7nm chip made by SMIC – a technological breakthrough that caught many by surprise. CNBC reports that revenue from China’s top chip equipment makers surged in the first half of the year. And Arrian Ebrahmi notes 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… Read More

4 Export Control Fallacies and Their Rebuttals

By Steve CoonenWriting in the Wall Street Journal last week, professors Henry Farrell and Abraham Newman criticize American export control policies as having the potential to create more problems then they solve. Pointing the finger at America as a force for destabilization is divorced from the reality of the global export control landscape. China’s commitment to using American technologies to build up its military has necessitated export controls targeting the country’s chip sector.Here are four fallacies promoted in the article (in italics) and my rebuttals:Fallacy #1: The U.S. is to blame for export control-related global disruptions“A new tit-for-tat is emerging, and as China responds to the turn in American policy, there is a risk that the… Read More

Reforming the Flawed Process of Listing Chinese Entities on A Case-By-Case Basis

By Steve CoonenIn 2019, the Department of Commerce’s Bureau of Industry and Security (BIS) wisely placed Huawei on the Entity List. This action was necessary for making sure the company could not obtain American components it needs to win the 5G race. But Huawei moved fast to protect its interests, quickly spinning off a company called Honor to maintain the flow of U.S. components required to produce 5G mobile devices. A state-owned company, Shenzhen Zhixin New Information Technology, subsequently purchased Honor in 2020, demonstrating the important role that the Chinese government plays in directing strategic technologies such as 5G. During my time serving at the Department of Defense (DOD), I personally pushed for the federal government to add Honor… Read More

Chinese Majority Owner of Lexmark Blocked By U.S Homeland Security Department

Last week, the Wall Street Journal reported that the U.S. Department of Homeland Security blocked the import of products made by Ninestar, the Chinese owner of Lexmark International. Ninestar and eight China-based subsidiaries are blacklisted because of their “participation in business practices that target members of persecuted groups” including Uyghurs.Lexmark positions itself as an American company (with a headquarters in Kentucky), exercising independence from the Chinese government. However, as CNBC reported in an analogous situation, “Huawei says it would never hand data to China’s government. Experts say it wouldn’t have a choice.” Dr. Miles Yu of the Hudson Institute further explains their obligation in a 2– minute video here.But while the federal government may ban such products, state… Read More

UPDATE: New Arkansas Law Prohibiting Contracts with China Is Progress, But Loopholes Need Closed

[Updated] On April 12, Arkansas Governor Sarah Huckabee Sanders signed into law  HB 1789, a bill to prohibit contracts with the People’s Republic of China (PRC). Introduced by Representative Mindy McAlindon and State Senator Gary Stubblefield, the bill demonstrates a commitment by Arkansas leaders to protect sensitive data from PRC intrusion and advances a growing trend of new state laws in 2023 (joining Idaho and South Dakota).However, one significant loophole presented during the legislative process renders the new law powerless and must be corrected when the state legislature reconvenes in 2024.When introducing the bill, Rep. Mindy McAlindon said “HB1789 is designed to protect Arkansas and Arkansans from the undue influence of the Communist Party of China. Arkansas has… Read More

U.S. Ready to Double Down on Huawei, Why Not SMIC?

The Biden administration is reportedly considering cutting Huawei, a well-known Chinese telecom giant with “inextricable ties to the Chinese Communist Party (CCP),” off from American suppliers, including the likes of Intel and Qualcomm. As a precursor, the Commerce Department is said to have told some American companies it will no longer issue licenses for U.S. tech exports to the CCP-backed company.At the end of last year, Huawei declared “business as usual” despite U.S. export controls and is believed to be backing projects in China for an “import-independent semiconductor supply chain.”Martijn Rasser, a technology expert at CNAS, described the Biden administration’s action on Huawei as a “really significant move.” He added, “The actions by the Commerce Department are partly… Read More

The Most Dangerous Chinese Company You Haven’t Heard Of

While Chinese companies like Huawei and TikTok have grabbed headlines for threatening American national security and data privacy, the Chinese chipmaker CXMT is less well-known. That doesn’t make it any less dangerous.Founded in 2016, Changxin Memory Technologies (CXMT) was created as a “pilot demonstration” of the Made in China 2025 initiative – the Chinese government’s effort to make China the world leader in high-tech manufacturing. Like fellow would-be state champion chipmakers SMIC and YMTC, CXMT is awash in Chinese subsidies. The company’s strategy relies on IP theft to close ground against competitors.  It also has multiple business leaders also serving in important Communist Party roles and connections to the PLA.As China’s largest maker of DRAM (dynamic random-access memory)… Read More

BIS Leader Previews New Civil Penalties for Export Control Violations

The Commerce Department’s Bureau of Industry and Security’s (BIS) Assistant Secretary for Export Enforcement, Matthew Axelrod, sounded all the right notes at a speech to the Society for International Affairs on May 16th. Recognizing that adversaries like Russia and China advance their own interests at the expense of the United States, Axelrod previewed strengthened civil penalties from BIS designed to deter American firms from violating export control laws. The proposed new penalties include:BIS publicly disclosing which companies it investigates for export control violations when a case opens, not when it is resolved, often years laterForcing companies to admit wrongdoing if they are found to have violated export control lawsIncreasing financial penalties for violationsThese ideas are welcome… Read More

YMTC Threat Continues to Grow; American Companies May Be Breaking U.S. Law

The Financial Times reports that the U.S. government is examining whether YMTC, a Chinese state-owned semiconductor manufacturer with deep ties to the Chinese military, is supplying Chinese telecom giant Huawei with chips for its 20e phone. If true, that relationship poses enormous legal risk for American companies currently doing or hoping to do business with YMTC, including Apple. For more, visit China’s Army to infiltrate iPhones with YMTC Chips.To recap: Huawei is currently subject to U.S. export controls over concerns its technologies will be used to surreptitiously collect user data and feed it back to the Chinese government. If YMTC is in fact found to be supplying Huawei with chips made with help from American tech firms like Lam… Read More