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 later Forcing companies to admit wrongdoing if they are found to have violated export control laws Increasing financial penalties for violations These ideas are welcome… Read More

Chinese Government Subsidies in the Semiconductor Industry: Bad for American Companies and Competitiveness

Last month, Stephen Ezell, Vice President for Global Innovation Policy at the Information Technology and Innovation Foundation, testified before the U.S.-China Economic and Security Review Commission. Much of his testimony addressed how Chinese government subsidies in its homegrown semiconductor industry has damaged American companies and the marketplace in general.  The problem, according to Ezell, is that “Chinese subsidies (and other mercantilist practices) are propping up inferior, less innovative Chinese semiconductor enterprises at the expense of U.S. and other foreign competitors.” He continues: “In the semiconductor sector, perhaps China’s most pernicious mercantilist practice has been aggressively industrial subsidization, largely channeled through the country’s $170 billion National Integrated Circuit (IC) Fund.” Writes Ezell, “Such subsidies are an important part of the explanation… Read More

Is BIS Edging Closer to Putting YMTC on the Entity List?

Is BIS Edging Closer to Putting YMTC on the Entity List? The Information reports that the U.S. Department of Commerce is weighing restrictions on the sale of semiconductor manufacturing equipment (SME) to YMTC, China’s national champion semiconductor manufacturer known to have close ties with the Chinese military. These restrictions, which would also reportedly apply to other state-backed firms such as Hua Hong Semiconductor and ChangXin Memory Technologies, would deal a blow to YMTC’s ability to produce chips, and secure a victory for American national security. The rules, which reportedly take months to develop, would echo the decision the Commerce Department’s Bureau of Industry and Security (BIS) made in 2020 to place China’s Semiconductor Manufacturing International Corporation on the Entity List… Read More

Lenovo to Benefit from the PRC’s Indigenous Tech Ultimatum. Will Democratic Countries Respond?  

Early this morning, Bloomberg reported, “China has ordered central government agencies and state-backed corporations to replace foreign-branded personal computers with domestic alternatives.” The directive, claims Bloomberg, is consistent with China’s “sweeping effort to reduce its dependence on geopolitical rivals such as the U.S. for everything from semiconductors to servers and phones.” Lenovo Consolidates Chinese Market and Continues to Sell to States – Despite Military Bans   Lenovo, the global PC manufacturer partly owned/controlled by the Chinese government, will profit most from the ban as the central government replaces 50+ million PCs, with many more sales to come from provincial governments. Ironically, the Bloomberg report speculated that Beijing is concerned about security, yet the State Department, Department of Homeland Security, and… 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

PLA in Your iPhone? CTT Launches New Site on the Implications of Apple’s Negotiations with Chinese “National Champion” YMTC

Late last month a report surfaced that Apple is in talks with China’s “national champion” semiconductor maker, Yangtze Memory Technologies Co. (YMTC), to provide chips for its next iPhone. This week, China Tech Threat (CTT) is launching a new site to track Apple’s negotiations with YMTC, what’s at stake for the U.S. from national security and economic standpoints, and how policymakers and experts are reacting. “Apple is the most valuable brand in the world, and the choices it makes send important signals,” Dr. Roslyn Layton explained. “Apple’s partnership with YMTC would put the Chinese military in the iPhone, one of the most popular devices in the world. This deal would threaten Americans’ privacy and security, undermine semiconductor jobs in democratic… Read More

CTT Quick Cut: BIS Is at an “Inflection Point,” Should “Rebalance Economics and Security”

Last week Congress confirmed Alan Estevez to serve as Undersecretary of Commerce for Industry and Security, finally filling the top post at the “most important agency most Americans have never heard of.” Mr. Estevez’s confirmation comes at a critical juncture, and he inherits a full slate of issues to address. China Tech Threat Co-Founder Dr. Roslyn Layton was joined by Kevin Wolf, former Assistant Secretary of Commerce for Export Administration, and Dr. Derek Scissors, Senior Fellow at the American Enterprise Institute, for the latest CTT Quick Cut, “Competing Views on the Future of BIS,” where Mr. Estevez and the agency’s priorities were the focus of discussion. Setting an Agenda at BIS Mr. Estevez needs to take the lead on setting… Read More

Apple Reportedly Considering Sourcing Chips for Next iPhone from China’s “National Champion”

Apple, the world’s most valuable company, is considering sourcing memory chips for its iPhone 14 from Yangtze Memory Technologies Company (YMTC), according to a recently uncovered Credit Suisse report. The report, which was obtained by industry news outlet Light Reading, states that “YMTC could start supplying memory for new iPhone models in 2022.” Noting that Apple began adapting the design of NAND controllers last year to support YMTC chips, the report predicts that the company’s decision will be made within the next two months. “YMTC’s presence in the best-selling smartphone would look about as welcome as a Gazprom pipeline through Germany does to opponents of Russia,” Light Reading editor Iain Morris adds. U.S. experts and policymakers have cautioned that YMTC,… Read More

Momentum Builds in Washington to Protect and Re-Shore Semiconductor Supply Chains

Both the Biden Administration and the U.S. Congress are focused on reducing the national security risk from China-based semiconductor supply chains. On March 17th, a bipartisan group of members of Congress introduced the Facilitating American-Built Semiconductors Act (FABS Act), a piece of legislation designed to “drive long term investment into the United States for the design and manufacturing of semiconductor chips.” This is in response to the fact that, as the office of Congressman Mike Kelly notes, “As global competitiveness for semiconductor control has intensified, countries like Communist China have provided incentives to draw companies to manufacture semiconductors on their soil.” Days later, at a bipartisan Department of Commerce roundtable on March 21st, Secretary Gina Raimondo hosted Senator Todd Young,… Read More

CTT Conversations: The NVIDIA Hack and the National Security Catastrophe

The hack of NVIDIA has exposed the blueprints of a $580 billion semiconductor juggernaut, putting some of America’s most valuable chip designs at risk of appropriation by Chinese government entities and others. CTT sat down with Dylan Patel, a leading semiconductor industry analyst and Daniel Markus, lead China Task Force staffer to discuss mitigating the impact of this hack. Patel provided an overview of the Nvidia hack and the implications pertaining to Chinese semiconductor firms. Patel explained, “Nvidia’s software is best in class, and hackers have exposed Nvidia’s proprietary designs and put them in the public domain. Now Chinese AI firms and others can kick start their own R&D and catch up with ease… It’s virtually impossible to protect yourself… Read More