The US House of Representatives' bipartisan select committee on China released a 741-page annual report on Tuesday detailing how Chinese companies are aggressively acquiring US chipmaking equipment to produce advanced semiconductors, violating new US export restrictions meant to slow China's semiconductor industry.
The Joe Biden administration restricted exports of 14-nanometer or below semiconductor chipmaking equipment to China in October 2022. However, the Commerce Department's 14-nanometer limit created a loophole making it difficult for authorities to confirm that the equipment is not being used for more sophisticated chip manufacture since importers declare that it is meant for older production lines.
The US Capitol is seen in Washington, DC, on January 3, 2018, before the opening of the second session of the 115th Congress.
US Authorities Struggling to Impose Restrictions: Source
According to Reuters, a source disclosed that the US government is still having difficulty stopping Huawei, the massive Chinese telecom company, from having its advanced 7-nanometer chip manufactured at SMIC, China's top chipmaker, for its Mate 60 Pro smartphone. In 2019 and 2020, trade restrictions were imposed, but Huawei and SMIC managed to circumvent them, casting doubt on the effectiveness of US export laws.
The United States effectively mobilized allies Japan and the Netherlands, both of which have strong sectors producing chipmaking equipment, to put their export restrictions on this vital technology to limit China's access to sophisticated chipmaking gear. The report shows that China used the time lapse between the U.S. laws in October 2022 and similar steps by Japan and the Netherlands in July and September 2023 to stockpile equipment.
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China's Semiconductor Equipment Imports Surge Despite US Limits
China's imports of chip-manufacturing machinery from the Netherlands increased by a startling 96.1% between January and August of 2023 to a total of $3.2 billion, up from $1.7 billion during the same period in 2022. During the first eight months of 2023, China's total imports of semiconductor equipment from all nations amounted to $13.8 billion.
In the three months that ended in September, semiconductor manufacturing equipment imports, mainly lithography, increased 93% to $8.7 billion. China imported more than six times more lithography equipment from the Netherlands, possibly owing to ASML, a leading chipmaking equipment manufacturer, according to Nikei Asia.
Despite these findings, the Congressional report does not provide solutions to US law deficiencies. Rather, it requests that US Congress order a yearly review of the General Accountability Office's assessment of the efficacy of export restrictions on chip-making machinery to China. This review is to be completed in six months and then made public.
Last month, the Biden administration declared its intention to stop sending cutting-edge AI chips and chip-making equipment, such as Nvidia's, to China. Under the measure, several Chinese firms producing cutting-edge chips were blocked from accessing supply produced in the US.
Commerce Department Secretary Gina Raimondo has made it clear that the goal of the import limits on sophisticated semiconductors is not to hurt the Chinese economy, even if they are largely intended to limit China's gains in AI and military technologies, per Forbes.
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