Top Senators Want Controls On US Contractors Using Chinese Chips

Two top US Senators are pushing a proposal that would bar the federal government from working with companies that use semiconductors made by firms deemed to be Chinese military contractors.  

Senate Majority Leader Chuck Schumer (D-NY) and Senator John Cornyn (R-TX) are pushing an amendment to the National Defense Authorization Act (NDAA) to enforce the anti-China rules, Reuters reported on Tuesday. The annual bill provides billions in funding for the American military and other critical government areas, and sets policies for future development spending.

With the NDAA for the 2023 fiscal year expected to be passed in December, the proposal would apply to companies working with firms defined by the Department of Defense as Chinese military contractors.

"If American business wants the federal government to buy their products or services, they shouldn't be using the kind of Chinese-made chips that, because of Chinese government involvement, put our national security at risk," Schumer said.

If approved, the proposed amendment by Schumer and Cornyn would serve as another escalation in US efforts to stymie China's semiconductor industry while Uncle Sam tries to reshore chip manufacturing and shift supply chains away from Asia.

While Schumer said the US government and economy needs to "rely on chips made right here in America," it's not clear if his proposal would require federal contractors to buy American-made chips.

The US has been seeking to hamper China's homegrown silicon capabilities because of the country's "military-civil fusion" doctrine, where private firms must share their technologies,and any software vulnerabilities, with China's military.

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When considering China's doctrine, the proposal by Schumer and Cornyn raises the prospect that US contractors could be barred from using semiconductors made by any Chinese company, though the full implications aren't clear yet.

In October, the Pentagon released a list of Chinese military contractors operating in the US. Included on the list are SMIC, a partially state-owned company that is China's largest contract chip manufacturer, and China Electronics Corporation, the country's largest state-owned IT company that designs and manufacturers semiconductors.  

Over the past few years, the US has added extra hurdles for American companies working with several Chinese firms, including SMIC, for national security reasons. This has primarily been done through the Department of Commerce's Entity List, which requires a special license for American companies who want to export certain technologies to Chinese firms on the list.

Recently, the US issued new export restrictions on chip design and manufacturing tools that could allow Chinese semiconductor companies to make advanced chips. ®