UPDATED AT 8:49 a.m. ET ON 12-21-2022
Two of China’s biggest chipmakers, Yangtze Memory Technologies and Shanghai Micro Electronics Equipment, are among 36 Chinese companies effectively banned from importing components from the United States as part of new U.S. export rules announced Thursday.
The firms have been added to the Department of Commerce's Entity List, the same designation given to telecom giant Huaweiin May 2019. The listing means that U.S. companies can no longer sell goods to them without obtaining a permit.
The latest in a series of moves that U.S. policymakers say are driven by growing national security concerns, the move amounts to an effective ban given that such permits are very difficult to obtain. It's also an escalation from rules issued Oct. 7 that only banned the sale of high-tech chip technology to Chinese companies.
Alan Estevez, the under secretary of commerce for industry and security who has led the charge on the new export rules, said in a statement that the new rules were intended to be supplementary.
“Today we are building on the actions we took in October to protect U.S. national security by severely restricting [China’s] ability to leverage artificial intelligence, advanced computing, and other powerful, commercially available technologies for military modernization and human rights abuses,” Estevez said.
“This work will continue, as will our efforts to detect and disrupt Russia’s efforts to obtain necessary items and technologies and other items for its brutal war against Ukraine, including from Iran.”
Military ties
The Department of Commerce statement noted that 21 of the 36 newly listed firms were working on artificial intelligence technology projects for China’s military, while seven “have demonstrable direct ties” to the development of hypersonic airplanes, hypersonic weapons and ballistic missiles, as well as software the models damage caused by weapons.
It also noted that one listed company was engaged in “China’s campaign of repression, mass arbitrary detention, and high-tech surveillance against Uyghurs and other Muslim minority groups” in the Xinjiang Uyghur Autonomous Region, and shipping U.S. technology to Iran’s military.
But it’s the designation of Yangtze Memory Technologies and Shanghai Micro Electronics Equipment that could prove most damaging.
Both major companies are at the heart of any hopes that China has of building a standalone and homegrown chip industry amid a U.S.-led campaign to cut the country off from key components.
Shanghai Micro is the country’s leading maker of equipment for lithography, a highly technical process that uses microscopic rays of light to etch the circuitry of the processors that power computers, many consumer goods and weapons. Yangtze Memory, meanwhile, had been in talks with Apple to supply it with chips for the iPhone 14.
“Cold War mentality”
Beijing, for its part, has described the efforts to cut off its companies from chip technology as part of a “Cold War mentality,” and this week initiated a challenge to U.S. policies at the World Trade Organization.
While Chinese chip manufacturers were rapidly catching up to world standards – largely set by the Taiwan-based behemoth Taiwan Semiconductor Manufacturing Company – many industry experts still say the country is years away from even nearing self-sufficiency.
On Wednesday, Chinese Foreign Ministry spokesman Wang Wenbin slammed the latest rules as “blatant economic coercion and bullying.”
“The U.S. has been stretching the concept of national security, abusing export control measures, engaging in discriminatory and unfair treatment against enterprises of other countries, and politicizing and weaponizing economic and sci-tech issues,” Wang said.
“What the U.S. has been doing gravely undermines the normal business activities between Chinese and American companies,” he added. “It is not in the interests of China, the U.S. or the whole world.”
But in Washington both parties seem increasingly in lockstep on the national security concerns surrounding exports of chips to companies with links to the Chinese Communist Party and China’s military.
A defense spending bill expected to pass the Senate this week or next will likely also include a ban on the U.S. government from buying or using chips from YMTC, SMIC or ChangXin Memory Technologies.
“I’ve long sounded the alarm on the grave national security and economic threats behind YMTC and other CCP-backed technology companies, like CXMT and SMIC,” Senate Majority Leader Chuck Schumer (D-N.Y.) said in a statement Thursday morning.
“YMTC poses an immediate threat to our national security, so the Biden Administration needed to act swiftly to prevent YMTC from gaining even an inch of a military or economic advantage.”
Correction: An earlier version of this story referred to Xinjiang as a province, rather than an autonomous region.