Selling the Forges of the Future
How the CCP Gets its Key Equipment for Making Semiconductors from U.S., Dutch, and Japanese Companies
The Chinese Communist Party (CCP) is straining with all its might to build a domestic, self-sufficient, semiconductor manufacturing industry in the People’s Republic of China (PRC). To do this, the PRC has been acquiring semiconductor manufacturing equipment (SME) produced by U.S. and allied companies to build in semiconductor fabrication facilities (“fabs”) in the PRC that produce a wide range of semiconductor chips, including advanced, foundational, and legacy chips. The ability to design and produce semiconductors lies at the heart of the technology competition with China, and SME represents a crucial chokepoint that the U.S. and our allies currently have over China. As the U.S. government works with our allies and partners and plots the course ahead on export-control policy and related actions, this crucial chokepoint must be preserved, not squandered.
The United States and our allies have taken some steps to restrict advanced SME from being sold to anyone in the PRC and a broader set of SME from being sold to some particularly threatening PRC entities, but China is still buying vast quantities of highly sophisticated SME from the United States, Japan, and the Netherlands. This investigation did not seek to address illegal activity. The findings discussed below do not claim or posit that any Toolmaker has violated applicable U.S., Dutch, or Japanese laws. To be effective, SME export controls must apply to all of the PRC, not just individual entities, and must encompass any components or other inputs that support the production of advanced or foundational semiconductors.
The PRC’s procurement of SME presents military, trade, economic security, and human rights threats:
Military. The PRC will manufacture chips for the People’s Liberation Army (PLA) weapon systems that could be used to kill American and allied soldiers, sailors, airmen, and marines, especially via the PLA’s “intelligentized” warfare concept leveraging artificial intelligence (AI) and high-performance computing.
Trade. China will build a domestic, vertically integrated chip manufacturing industry, rendering its military and economy resistant to the effects of future computing-related export restrictions by the United States and our allies.
Economic Security. China will gain an economically dominant chip manufacturing position in both legacy and leading-edge chips for current and future strategic industries with national security implications, including AI.
Human Rights. As the Select Committee has documented in previous investigations, the CCP uses both AI and high-performance computing to violate human rights domestically and promote digital authoritarianism globally.
Read the full report here.