Tech Supply Chains Scrambling to Decouple from China-Owned Businesses

Bloomberg reported this week that the aerospace, technology, automobile, and countless other industries with global supply chains are scrambling to comply with a provision in the National Defense Authorization Act (NDAA) for Fiscal Year 2019 which would require companies to certify that their entire global supply chain is devoid of gear from certain Chinese tech firms. This includes Huawei, ZTE, Hikvision, and other targeted Chinese tech firms with ties to the Chinese government. China Tech Threat commends lawmakers on both sides of the aisle for implementing this section, particularly the cosponsors of the 2019 NDAA, Rep. Mac Thornberry (R-TX) and Rep. Adam Smith (D-WA). While Huawei, ZTE, and other named companies should be banned from operating in American supply chains, there are many companies owned and affiliated with the Chinese government that that continue to operate in the US and put Americans’ security at risk.

The NDAA provision in question, section 889, part B, contains language that points to the potential for other companies to be targeted for being owned or controlled by the Chinese government. In paragraph (3)(D), it posits that “the Secretary of Defense, in consultation with the Director of the National Intelligence or the Director of the Federal Bureau of Investigation,” may ban additional companies from global supply chains if they reasonably believe the companies to “be an entity owned or controlled by, or otherwise connected to, the government of a covered foreign country.”

As revealed in China Tech Threat’s  white paper “Stealing From the States: China’s Power Play in IT Contracts,” technology companies Lenovo and Lexmark fit this very definition. We noted that Lenovo is a Chinese government owned entity, which was seeded at the Chinese Academy of Sciences, a “nationally directed infrastructure of institutions, seeking to obtain technology from foreign firms to key scientific areas that often have military applications.” Additionally, Lexmark’s has a connection to the Chinese government which prompted the US Social Security Administration to cancel an IT contract with the company.

It is clear that while the NDAA provision is a step in the right direction, its limited focus on two companies ignores the hundreds of Chinese government owned IT firms which endanger America’s national security. China Tech Threat encourages Congress to pursue any and all potential solutions to this problem, such as Sens. Cruz and Hawley’s bill that prevents federal funds from being spent on information communication technology produced by Chinese technology companies. China Tech Threat welcomes other lawmakers to stand up to Chinese tech threats.