• February 1, 2023

Cannabis Stocks Get Increased Attention As More States Legalize Weed — Do Industry Leaders Like Aurora, Cresco, Evolv And Others Deserve A Place In Your Portfolio?

Key takeaways Marijuana is a booming industry with lots of potential for growth. It is now legal in some way, shape or form in 47 states (plus Washington, D.C.). The biggest …

What The End Of The Covid-19 Public Health Emergency Will Mean For Older Adults

President Biden’s announcement that the Covid-19 public health emergency (PHE) will end on May 11 will have a significant impact on older adults. Some changes will be immediate, others won’t occur …

OpenAI Releases First $20 Subscription Version Of ChatGPT For Businesses

Share to Facebook Share to Twitter Share to Linkedin AI startup unicorn OpenAI is now ready to make money off its popular AI chatbot released in November. OpenAI has launched its …

Optimism that the federal government would counteract the growing power of Chinese military-linked chipmaker YMTC was high this week, but didn’t last long. The Monday news reported that “U.S. officials would ban the export of tools to China used to make NAND chips with more than 128 layers.” Then a bipartisan group of U.S. Senators wrote to urge the Commerce Department to add YMTC to the Entity List. It seemed that the Biden Administration would finally deliver the action that dozens of security and defense experts recommended for some time. But yesterday YMTC announced it could produce a 232-layer flash memory chip – a major advancement.

Tougher restrictions targeting YMTC still may happen, but whatever action happens now will be too little, too late. The Chinese government is one step closer to turning YMTC into a Huawei-style national champion and forcing the exit of other firms from the memory chip market. YMTC’s progress was known, but the “232-layer advancement suggets YMTC is closing in on global memory giants,” notes one industry observer.

China’s success – and America’s loss – reflects the consequences of U.S. government inaction. For the past two years, leaders like Senator Bill Hagerty, Senator Marco Rubio, Senator Mark Warner, and Representative Michael McCaul called for the Commerce Department to put YMTC on the Entity List. Rep. McCaul declared, “U.S. and foreign companies … are advancing CCP economic, military, and political priorities. Put another way, short-term corporate profits are sacrificing long-term American strategic interests. The Administration must use export controls to stop the PRC from further building out its semiconductor supply chain.”

Advertisement

YMTC cannot survive without the semiconductor manufacturing equipment produced by American firms like Lam Research, KLM, and Applied Materials. It now uses that capability to producing a cutting-edge chips to compete with foreign firms and put them out of business. This outcome could have been avoided, but the Commerce Department ignored multiple pleas from the Senate and dozens of security experts like James Mulvenon who repeatedly warned about YMTC and their links to the Chinese military.

This missed opportunity should motivate policymakers to quick and effective action. Recent reporting that the federal government is considering new restrictions for chipmaking tools with China-based Semiconductor Manufacturing International Corporation (SMIC) is welcome as SMIC is also tied to the Chinese military. SMIC’s researchers incorporate SMIC chips and processes in radiation hardening technologies, which are critical for military and space gear.

However the technology development demonstrates the current set of restrictions on SMIC which came into force in 2020 have been inadequate. As Rep. McCaul told China Tech Threat last year, “As currently written, the SMIC licensing policy appears designed to give the company access to nearly all the semiconductor manufacturing equipment, technologies, and other goods it needs to make semiconductors. With BIS denying less than 1 percent of license applications for SMIC, our concerns appear to have been validated.”

ChangXin Memory Technologies (CXMT) is another Chinese company BIS should put in its crosshairs. As China Tech Threat documented extensively in 2020, CXMT enjoys extensive support from the Chinese government and corporate leaders serving in key Communist Party roles. CXMT follows Chinese playbook for market domination, in this case gunning for control of the dynamic random access memory (DRAM) space. CXMT is also plagued by accusations of patent infringement and an inability to invest in and transition to new equipment to produce the next generation of chips. Its growth strategy will therefore likely depend on stealing IP and acquiring American chipmaking equipment. CXMT also has the potential disrupt its slice of the chip market. As Emily de la Bruyere of the Foundation for Defense of Democracies put it, “It’s not just YMTC…there are other problematic companies in the same category like ChangXin Memory…across the semiconductor value chain…that are state champions intended to erode this value chain.”

The Commerce Department is clearly failing on its mission to promote and protect US technologies from China. Many of its existing restrictions are not enforced, and bad players don’t get blacklisted. YMTC should have been on the Entity List years ago; now it’s poised to become the global champion. It looks like CXMT will be another one that got away. One thing is certain: US tool makers book record profits while Americans’ privacy and security take the backseat.

Advertisement

Leave a Reply

Your email address will not be published.