By Stephen Nellis
SAN FRANCISCO (Reuters) – A bipartisan investigation by U.S. lawmakers reveals that shortcomings in the efforts of the U.S. and its allies to limit China’s advanced chip manufacturing capabilities have permitted the country to acquire nearly $40 billion worth of sophisticated chipmaking machinery.
Both Democratic and Republican administrations in the U.S. have sought to curb China’s microchip production, recognizing its significance to national security.
However, discrepancies between the regulations set by the U.S., Japan, and the Netherlands have resulted in non-U.S. tool manufacturers selling equipment to certain Chinese companies that are off-limits to American firms, according to a report from the U.S. House of Representatives Select Committee on China obtained by Reuters.
The committee advocates for comprehensive restrictions on chipmaking tool exports to China from allied nations, rather than targeting individual Chinese chip manufacturers.
Last year, Chinese companies spent $38 billion on equipment from five leading semiconductor manufacturing tool suppliers, a significant 66% rise from 2022, despite the introduction of numerous export restrictions. This spending accounted for nearly 39% of total sales from Applied Materials, Lam Research, KLA, ASML, and Tokyo Electron, the report indicates.
The U.S. is concentrating on limiting China’s capacity to produce cutting-edge chips, which are vital for sectors like AI and military enhancements, due to national security fears. The two economic powerhouses are also competing to market advanced technologies, including AI data centers, to other countries.
“These sales have made China more competitive in the semiconductor manufacturing landscape, with significant ramifications for human rights and democratic principles worldwide,” the report stated.
In an interview, Mark Dougherty, president of Tokyo Electron’s U.S. branch, noted a decline in sales to China this year, attributed partially to new regulations, and expressed support for enhanced coordination between the U.S. and Japan.
“From the U.S. perspective, the desired outcome has yet to be fully realized,” Dougherty commented to Reuters.
Applied and Lam did not respond to inquiries for comments. ASML and KLA mentioned they would refrain from commenting until they reviewed the complete report. The committee reported that the tool manufacturers had collaborated on the findings disclosed in the report.
Three Chinese companies that have emerged as significant customers for toolmakers – SwaySure Technology Co, Shenzhen Pengxinxu Technology Co, and SiEn (Qingdao) Integrated Circuits Co – pose particular security risks. They were identified last year by the leads of the congressional committee, Chairman John Moolenaar, a Michigan Republican, and Ranking Member Raja Krishnamoorthi, an Illinois Democrat, in a letter to the Commerce Department, citing connections to a covert network supporting Huawei Technologies, leading U.S. officials to prohibit exports to these firms in December.
