Daily Management Review

Despite New Regulations, China Acquires US Equipment To Produce Cutting-Edge Chips—Report


Despite New Regulations, China Acquires US Equipment To Produce Cutting-Edge Chips—Report
Despite a slew of new export restrictions meant to impede developments in the nation's semiconductor industry, a report on Tuesday claimed that Chinese companies are purchasing American chipmaking equipment in order to produce cutting-edge semiconductors.
The Biden administration's October 2022 export curbs, which aim to prevent Chinese chipmakers from obtaining American chipmaking tools if they would be used to manufacture advanced chips at the 14 nanometer node or below, are the target of the 741-page annual report released by the U.S.-China Economic and Security Review Commission.
The report said that with the Commerce Department using the 14 nanometer restriction limit, "importers are often able to purchase the equipment if they claim it is being used on an older production line, and with limited capacity for end-use inspections, it is difficult to verify the equipment is not being used to produce more advanced chips".
The discovery coincides with the United States' efforts to determine how Huawei, the dominant Chinese telecom company, managed to manufacture an advanced 7 nanometer chip at SMIC, the country's leading chipmaker, in defiance of the export restrictions that were declared last year.
A trade restriction list that, in theory, prohibits U.S. suppliers from delivering specific technology to Huawei and SMIC was also added to in 2019 and 2020.
Although observers in China had speculated that SMIC might have manufactured the chip using equipment acquired before the October 2022 regulations, the research reveals that it had alternative means of acquiring the equipment from outside.
The United States successfully closed a significant gap in its attempts to prevent China from obtaining sophisticated chipmaking instruments by persuading allies Japan and the Netherlands, who own equally strong industries for chipmaking equipment, to declare their own limitations on the transfer of the highly sought-after technology.
However, the paper reveals how China accumulated weaponry by profiting from the delay between the US regulations from October 2022 and the Dutch and Japanese actions from July and September of 2023, respectively.
The paper states that China purchased semiconductor manufacturing equipment worth $3.2 billion (RMB 23.5 billion) from the Netherlands between January and August 2023. This is a 96.1% increase over the $1.7 billion (RMB 12 billion) imported during the same period in 2022.
In the first eight months of 2023, China imported $13.8 billion (RMB 100 billion) worth of semiconductor equipment from all over the world.
The report urges Congress to request an annual evaluation of the effectiveness of export controls on chipmaking equipment to China, which is to be completed within six months by the General Accountability Office and then made public. The report does not specifically recommend how to address the gaps in U.S. rules.
The U.S.-China Economic and Security Review Commission was established in 2000 with the purpose of recommending government action and submitting an annual report to Congress on the implications of the economic connections between the United States and China for national security.