SMIC Is One Of Many Semiconductor Fabs With Ties To China’s Military

It is the Constitutional responsibility for the US government to protect Americans’ security. Responding to Americans’ concerns of increasingly militarization by the People’s Republic of China (PRC), Congress passed the Export Reform Control Act (ECRA) in 2018. This tightens the export controls on “emerging” and “foundational” technologies so that US innovation is not weaponized against Americans. Recent reports by the Department of Defense, the bipartisan US-China Economic and Security Review Commission, and the China Task Force describe how the military and industrial sectors are fused in the PRC, and there is no reliable, systematic way to ensure that the same technology meant for consumer products ends up in weaponry.

The US is hardly alone in these concerns. Since 1996, it has partnered with some 40 nations in the Wassenaar Arrangement On Export Controls for Conventional Arms and Dual-Use Goods and Technologies. In December 2019, the group unanimously agreed to update the pact, adding some 50 points on semiconductors and semiconductor manufacturing equipment (SME). Indeed, one of the most powerful ways to deter the advance of the PRC military is to deny it the means of production. If the PRC is denied SME, it can’t produce its own chips. While that doesn’t stop the PRC’s long march to become self-sufficient in semiconductors, it certainly slows it down.

The Bureau of Industry and Security (BIS) at the Department of Commerce is charged with implementing these controls. They correctly named semiconductor firm Fujian Jinhua Integrated Circuit Company to the Entity List in 2018, as Jinhua was fueling US technology for dynamic random access memory (DRAM) integrated circuits into PRC weaponry. Last month, restrictions were imposed on Semiconductor Manufacturing International Corporation (SMIC), whose ties to the PRC military were documented assiduously by James Mulvenon at SOS International LLC and his team of some 30 linguists who combed the Chinese web. In the same vein, James Lewis of the Center for Strategic and International Studies describes the case for restricting Yangtze Memory Technologies (YMTC). ChangXin Memory Technologies (CXMT) was created as a “pilot demonstration” of the Made in China 2025 initiative, enjoys tremendous support from a variety of Chinese government programs, and features multiple business leaders also serving in important Communist Party roles. These are just four of some 90 PRC semiconductor fabrication plants or “fabs”.

My new report “The Art of Balancing Economic and National Security: Policy Review of Semiconductor Manufacturing Equipment Export Control” published at ChinaTechThreat describes the situation in detail. It reviews the key policy perspectives and stakeholders in the semiconductor export control debate and organizes them into three categories: No Restrictions, Balanced Approach, and Technology Decoupling. The No Restrictions policy seeks unrestricted access to the PRC to maximize revenue for the industry. It discounts the threat of the PRC and does not address security concerns. The Balanced Approach recognizes the PRC as a hostile power but attempts to optimize security and revenue. It advocates restricting semiconductor manufacturing equipment (SME) to PRC firms but potentially allowing it for US firms operating in the country. Technology Decoupling is the winding down of the economic relationship with PRC on strategic fronts and removing all semiconductor supply chains from the PRC. The Balanced Approach is the prudent policy choice because it optimizes security and economic goals and fulfils the national and international law. Given PLA ties, SMIC, YMTC, CXMT and others must be added to the Entity List to ensure critical US technology is not weaponized against Americans.

Papers by Saif Khan and Carrick Flynn at the Center for Security and Emerging Technology (CSET) illustrate how the Balanced Approach can work, bolstered by the fact that the US, Netherlands, and Japan already account for 90 percent SME. Indeed, the Netherlands and its leading SME maker ASML, already have restrictions in place, reportedly at the request of the US government. The US won’t have credibility if it doesn’t do what it asks of its allies. It is important for Congress to maintain the pressure on the Department of Commerce to fulfill its mandate on export control in a timely and sufficient fashion.

Originally published in Forbes.