Chinese firms engaged in the semiconductor industry managed to buy nearly $40 billion worth of sophisticated chipmaking gear last year, despite curbs from the United States and its allies to restrict flows of top tech, a bipartisan investigation by US lawmakers has found.
A report by the US House of Representatives Select Committee on China said the purchases point to gaps in the push to restrict China’s ability to manufacture advanced computing chips, because of inconsistencies in rules issued by the United States, Japan and the Netherlands.
Those inconsistencies led to non-US toolmakers selling equipment to Chinese firms that US companies could not, the report said.
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Chinese firms last year bought $38 billion in equipment from five top semiconductor manufacturing equipment suppliers, without breaking the law, the report said. That is a 66% increase from 2022, when many of the tool export restrictions were introduced.
They also accounted for nearly 39% of the aggregate sales of Applied Materials, Lam Research, KLA, ASML and Tokyo Electron, the report found.
‘Profound implications’ from sales
“These are the sales that made China increasingly competitive in the manufacture of a wide range of semiconductors, with profound implications for human rights and democratic values around the world,” the report said.
Three Chinese firms that have become major customers of toolmakers – SwaySure Technology Co, Shenzhen Pengxinxu Technology Co and SiEn (Qingdao) Integrated Circuits Co – are of particular security concern.
These firms were flagged last year by the congressional committee’s leaders, chairman John Moolenaar, a Michigan Republican, and ranking member Raja Krishnamoorthi, an Illinois Democrat, in a letter to the Commerce Department alleging ties to a secret network aiding Huawei Technologies. US officials barred exports to them in December.
“China is attempting to rewrite the entire supply chain,” said Craig Singleton, a senior fellow at the Foundation for Defense of Democracies, a think tank. “What used to be niche tool segments are now battlegrounds.”
US Democratic and Republican administrations have tried to restrict China’s ability to make state-of-the-art microchips, viewing the industry as crucial for national security, particularly due to its importance to AI and military modernisation. China and the US are also vying to sell advanced technology such as AI data centres to other nations.
The select committee report called for broader bans by the US group of allies on chipmaking tool sales to China, rather than narrower bans of specific Chinese chipmakers.
It also recommended tighter coordination among allies and broader restrictions, including on components China could use to build its own chipmaking tools.
In an interview, Mark Dougherty, president of Tokyo Electron’s US unit, said the industry’s China sales have started to decline this year, in part due to new regulations and welcomed more coordination between the US and Japanese governments.
“I think it’s clear, from a US perspective, there’s an outcome that is still desired that has not yet been achieved,” Dougherty told Reuters.
- Reuters, with additional editing by Vishakha Saxena
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