In a recent Congressional briefing, it was announced that President Joe Biden’s strategies to curb China’s access to advanced semiconductor technology are falling short. The report, published by the U.S.-China Economic and Security Review Commission, reveals that China continues to source high-tech chip manufacturing equipment from the U.S., often used for artificial intelligence (AI) applications, despite imposed sanctions.
The report points out that Chinese companies have found ingenious ways to dodge these sanctions, including making dubious claims about the use of equipment, fostering self-reliance, and reaching out to other nations. The report explains, “Chinese companies often manage to acquire the machinery by asserting it will be used in older production lines. Given the limited ability to inspect end-use, confirming whether the equipment is not used for more sophisticated chip production becomes tricky.”
In response, President Biden’s 2022 CHIPS and Science Act has been designed to bolster the U.S. semiconductor industry while concurrently challenging China. The Act also includes provisions to restrict the establishing of specific types of factories in China.
Semiconductor Analyst Dylan Patel, whose work is cited in the report, expressed concerns over the effectiveness of current restrictions on U.S. semiconductor manufacturing equipment, noting that “equipment companies are essentially selling every tool in their inventory to China.”
The Biden administration implemented additional semiconductor sanctions on October 17, 2023, to tighten the noose. These were developed to close loopholes in the existing restrictions and curb the export of machinery needed to produce advanced semiconductor chips.
The report also revealed that from January to August 2023, China imported semiconductor manufacturing equipment worth $3.2 billion from the Netherlands. This represents a staggering 96.1 percent increase from the $1.7 billion recorded for the corresponding period in the previous year. Over the initial eight months of 2023, China’s total imports of semiconductor equipment from around the globe touched $13.8 billion.
As per Commerce Secretary Gina Raimondo, the new restrictions introduced in October are part of the Biden administration’s broader goal to prevent China’s military from misusing AI technology.
The report also highlights China’s increasing dependence on semiconductor equipment, set to more than double its import levels from 2019. Additionally, the country has been boosting domestic chip production initiatives, exhibiting its potential to manufacture chips irrespective of U.S. restrictions. This is exemplified by Huawei’s recent launch of a high-tech smartphone powered by a domestically produced chip similar to a U.S.-controlled chip.