Cybersecurity Policy Report, Lawmakers: China’s Tech Rise Fueled by Lax U.S. Export Enforcement, (Oct 10, 2023)
Organizations Mentioned:Semiconductor Manufacturing International, Corp.
The Commerce Department’s lax enforcement of export control rules has enabled China to regain its competitive edge in semiconductor manufacturing, according to two Republican House members.
“Let us be clear: Export controls are not failing national security. Rather, it is the bureaucracy that writes policies, adjudicates licenses, and identifies technology that is failing export controls,” according to a letter from Reps. Michael McCaul (R., Texas), chairman of the House Foreign Affairs Committee, and Mike Gallagher (R., Wis.), chairman of the House Select Committee on the Chinese Communist Party (CCP).
The letter, addressed to Jake Sullivan, the White House national security adviser, criticizes the Commerce Department’s Bureau of Industry and Security (BIS), which it says is not following “the policy of the White House.”
The letter cites recent advancements by Semiconductor Manufacturing International Corp. (SMIC), a chip maker partially controlled by the Chinese government that recently helped Huawei Technologies Co. Ltd. release an advanced 5G smartphone (CPR, Sept. 14).
“SMIC’s growing capabilities reveal a stagnant, obscured bureaucracy that does not understand China’s industrial policy, does not understand China’s military goals, and does not understand technology at all—and does not have the will to act. After years of oversight and continued pressure from the Congress, BIS still appears more inclined to listen and respond to the industries it regulates than elected law-makers,” the letter says.
SMIC was placed on BIS’s “entity list” in 2020, which should have hobbled its ability to obtain technologies from U.S. exporters and prevented its ascent, they note. But a “loophole-riddled licensing policy” has enabled SMIC to obtain advanced technologies from U.S. exporters that won permission from BIS to do business with SMIC, they claim.
“BIS has been enabling SMIC’s rise for more than a decade,” they allege. “Make no mistake, BIS’s lack of resolve has led to SMIC being more advanced than any current U.S.-based foundry.”
“Regrettably, BIS made its ineffective licensing policy despite Congress pointing out each loophole and insufficiency in its policy. These mistakes are pushing the United States toward a national security crisis,” the lawmakers say.
Reps. McCaul and Gallagher urged immediate action “to cut off and limit workarounds for advanced semiconductor and tool exports to China” and end the BIS policy of “making the provision of cloud computing a licensable activity.”
“Following repeated violations of U.S. law and support for China’s military, SMIC and Huawei should be hit with full blocking sanctions, which would cut them off completely from U.S. technology and the U.S. financial system,” they added.
They asked the White House to respond within two weeks to questions regarding BIS policies and to provide a classified briefing regarding specific actions targeting SMIC.
“If export controls are a national security tool and strategic asset, they must be used,” they said. “BIS has a narrowing opportunity to act and constrain the CCP military before the moment is lost.”
In testimony before the Senate Commerce, Science, and Transportation Committee last week, Commerce Secretary Gina Raimondo acknowledged that the department’s export control regime had gaps and recommended that Congress adopt legislation to strengthen BIS’s ability to address untrustworthy technology from adversarial nations (CPR, Oct. 5).
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