Two of China’s largest chipmakers, Yangtze Memory Technologies and Shanghai Micro Electronics Equipment, are among 36 Chinese companies effectively banned from importing components from the United States under new US export regulations announced Thursday.
The companies were added to the Department of Commerce’s Entity List, the same designation as telecom giant Huawei in May 2019. The listing means US companies can no longer sell goods to them without obtaining a permit.
The latest in a series of moves that US politicians say are being driven by growing national security concerns amounts to an effective ban because such permits are very difficult to obtain. It’s also an escalation of rules enacted Oct. 7, which only banned the sale of high-tech chip technology to Chinese companies.
Alan Estevez, the undersecretary for industry and security who has taken responsibility for the new export rules, said in a statement that the new rules are meant to be complementary.
“Today we are building on the actions we took in October to protect US national security by severely restricting it [China’s] Ability to use artificial intelligence, advanced computers and other powerful, commercially available technologies for military modernization and human rights abuses,” Estevez said.
“This work continues, as do our efforts to uncover and disrupt Russia’s efforts to obtain necessary items and technology and other items for its brutal war against Ukraine, including from Iran.”
The Commerce Ministry statement said that 21 of the 36 newly listed firms are working on artificial intelligence technology projects for China’s military, while seven have “demonstrable direct links” to the development of hypersonic aircraft, hypersonic weapons and ballistic missiles, as well as software the models have weapon damage.
It also found that a publicly traded company was involved in “China’s campaign of repression, mass arbitrary arrests and high-tech surveillance against Uyghurs and other Muslim minorities” in Xinjiang province and supplied US technology to the Iranian military.
People visit a Semiconductor Manufacturing International Corporation (SMIC) booth at the China International Semiconductor Expo (IC China 2020) in Shanghai, China, 2020. Buying or using chips from SMIC and other companies. (Reuters)
But it’s the designation of Yangtze Memory Technologies and Shanghai Micro Electronics Equipment that could prove most damaging.
Both big companies are at the center of all China’s hopes of building a self-contained and indigenous chip industry amid a US-led campaign to cut off the country from key components.
Shanghai Micro is the country’s leading manufacturer of equipment for lithography, a highly technological process that uses microscopic beams of light to etch the circuits of the processors that power computers, many consumer products and weapons. Meanwhile, Yangtze Memory had been in talks with Apple to supply it with chips for the iPhone 14.
“Cold War Mentality”
Beijing, for its part, has described efforts to cut its companies off from chip technology as part of a “Cold War mentality” and launched a US policy challenge at the World Trade Organization this week.
While Chinese chipmakers are fast catching up to world standards – set largely by Taiwan-based giant Taiwan Semiconductor Manufacturing Company – many industry experts still say the country is years away from anywhere close to being self-sufficient.
On Wednesday, Chinese Foreign Ministry spokesman Wang Wenbin criticized the latest rules as “blatant economic coercion and bullying”.
“The US has expanded the concept of national security, abused export control measures, discriminated against and unfairly treated other countries’ enterprises, and politicized and armed economic and scientific-technical problems,” Wang said.
“What the US has done seriously undermines normal business activities between Chinese and American companies,” he added. “It’s not in the interests of China, the US, or the world at large.”
But in Washington, both parties appear to be increasingly united on national security concerns surrounding the export of chips to companies with ties to the Chinese Communist Party and the Chinese military.
A defense spending bill expected to pass the Senate this week or next is also likely to include a ban on the US government buying or using chips made by YMTC, SMIC or ChangXin Memory Technologies.
“I have long raised the alarm about the serious national security and economic threats behind YMTC and other CCP-backed tech companies like CXMT and SMIC,” Senate Majority Leader Chuck Schumer (DN.Y.) said in a statement on Tuesday Thursday morning.
“YMTC poses an imminent threat to our national security, so the Biden administration had to act quickly to prevent YMTC from gaining even an inch of military or economic advantage.”