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U.S. adds China YMTC to blacklist

Thursday, December 22, 2022

The U.S. Commerce Department is blacklisting Yangtze Memory Technologies Co. (YMTC) and more than 20 other Chinese chipmakers suspected of an AI threat to U.S. national security.

The Commerce Department’s Bureau of Industry and Security (BIS) expanded measures taken in October by adding YMTC and companies like AI chip designer Cambricon Technologies to its so-called Entity List, blocking their ability to buy semiconductors and production tools that are made with U.S. technology.

“Today, we are building on the actions we took in October to protect U.S. national security by severely restricting the PRC’s ability to leverage artificial intelligence, advanced computing, and other powerful, commercially available technologies for military modernization and human rights abuses,” Alan Estevez, Under Secretary of Commerce for Industry and Security, said in prepared remarks issued Wednesday. “This work will continue.”

Twenty-one of the companies are “major” AI-chip developers and vendors that support the PRC military and defense industry, according to the BIS statement. Seven of the entities supporting the PRC’s military modernization have been engaged in hypersonic weapons development and other efforts related to China’s military activities, the BIS said.

Longer than two years ago, China became the world’s first nation to deploy hypersonic missiles that are capable of evading interception. The U.S. has yet to announce its own.

In July, U.S. Senate Majority Leader Chuck Schumer and a bipartisan group of senators called on the Department of Commerce to add YMTC to the Entity List.

Schumer said in an email provided to EE Times that he has introduced an amendment to the proposed National Defense Authorization Act (NDAA) that would prevent the U.S. government from purchasing and using chips made by China’s Semiconductor Manufacturing International Corp. (SMIC), ChangXin Memory Technologies (CXMT) and YMTC. The proposed NDAA will pass the Senate this week, according to Schumer.

The U.S. government, including the Department of Defense, relies on imported chips for its computing and weapons systems.

“I’ve long sounded the alarm on the grave national security and economic threats behind YMTC and other Chinese Communist Party-backed technology companies, like CXMT and SMIC,” Schumer said in prepared remarks. “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.”

Others expressed doubts about why memory chipmaker YMTC should be considered a national security threat.

“The new entity listing cited YTMC supplying Huawei and HikVision, two other entity-listed companies as a concern and the primary justification for listing,” said Paul Triolo, a senior VP at Dentons Global Advisors. “This somewhat tautological justification does not explain what the national security issue is when a Chinese company is providing commodity semiconductors to another Chinese company for consumer handsets that are not even at the cutting edge.”

The earlier U.S. measures announced on Oct. 7 were expected to set back China’s chipmakers by generations, while incurring billions of dollars in lost sales by global suppliers of semiconductors and fab tools, according to analysts surveyed by EE Times.

This latest move will add momentum by companies in the global supply chain to design out U.S. technology, Triolo said.

“The emergence of a completely U.S. technology-free semiconductor supply chain for both manufacturing and tools is some way off, but the die has been cast, and China has a lot of resources to throw at the problem,” he said. “The big wild card here is how Beijing will react to further U.S. efforts to cut off its firms from using Taiwan and Taiwan Semiconductor Manufacturing Co. (TSMC) as a manufacturing base.”

In 2020, the administration of former U.S. President Donald Trump blocked TSMC from supplying advanced chips to Huawei. At the time, Huawei accounted for about 14% of TSMC’s sales.

The new U.S. measure is likely to be the catalyst that forces Beijing to respond in ways it has not considered before, Triolo said.

“The latest restrictions will likely be added to China’s World Trade Organization complaint at a minimum,” he added. “Responses could include naming some U.S. firms to the Unreliable Entities List, investigating firms under the anti-sanctions or blocking law, or using cybersecurity reviews to harass U.S. firms operating in China.”

Other responses from China could include limiting the supply of rare earths and downstream products to U.S. end users, according to Triolo.

By: DocMemory
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