Chinese Companies Continue to Buy US Chipmaking Equipment Despite Export Curbs
Chinese companies are still acquiring chipmaking equipment from the United States to produce advanced semiconductors, despite recent export restrictions aimed at hindering China’s semiconductor industry, according to a congressional report released on Tuesday. The report, which spans 741 pages and was issued by the House of Representative’s bipartisan select committee on China, criticizes the Biden administration’s October 2022 export curbs. These restrictions seek to prevent Chinese chipmakers from obtaining US chipmaking tools if they are intended for manufacturing advanced chips at or below the 14-nanometer node.
The report highlights that the Commerce Department’s use of the 14-nanometer restriction allows importers to purchase the equipment by claiming it will be used on older production lines. Due to limited capacity for end-use inspections, it becomes challenging to verify whether the equipment is actually being used for producing more advanced chips. This finding is significant as the United States is currently attempting to determine how Huawei, a Chinese telecoms giant, managed to develop a sophisticated 7-nanometer chip for its Mate 60 Pro smartphone using equipment from China’s top chipmaker, SMIC, despite the export curbs announced last year.
Both Huawei and SMIC were included in trade restriction lists in 2019 and 2020, theoretically prohibiting US suppliers from shipping certain technology to these companies. Observers had previously speculated that SMIC might have manufactured the chip using equipment obtained before the October 2022 rules. However, the report demonstrates that SMIC had alternative means of acquiring the necessary equipment from foreign sources.
To impede China’s access to advanced chipmaking tools, the United States successfully convinced allies Japan and the Netherlands, which possess robust chipmaking equipment industries, to impose their own restrictions on exporting this technology. Nevertheless, China managed to stockpile equipment during the gap between the US rules in October 2022 and the similar moves by Japan and the Netherlands in July and September 2023, respectively, as outlined in the report.
According to the report, from January to August 2023, China imported semiconductor manufacturing machines worth $3.2 billion (RMB 23.5 billion) from the Netherlands, marking a 96.1% increase compared to the $1.7 billion (RMB 12 billion) imported during the same period in 2022. China’s overall imports of semiconductor equipment from all countries totaled $13.8 billion (RMB 100 billion) in the first eight months of 2023.
While the report does not propose specific recommendations to address the loopholes in US rules, it urges Congress to request an annual evaluation by the General Accountability Office. This evaluation, to be completed within six months, would assess the effectiveness of export controls on chipmaking equipment to China and be made public.
(Reporting by Alexandra Alper; Editing by Chizu Nomiyama)
