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Advanced technology still flows to China “almost unrestricted”? U.S. Department of Commerce promises to tighten loopholes

Advanced Technology:

U.S. Secretary of Commerce Gina Raimondo revealed on Monday (December 11) that artificial intelligence chip manufacturer NVIDIA plans to launch three high-end AI chip products for the Chinese market. Research the details to make sure it does not violate export controls.

“We will check every specification of every new chip to ensure that it does not violate export controls,” she said in an interview with Bloomberg News. She also said that the Commerce Department will continue to update export controls.

Before Raimondo said this, a report by the U.S. Congress last Thursday pointed out with numerous examples that there are serious shortcomings and loopholes in government export controls, which still allow the “almost unrestricted” flow of advanced U.S. technology to Chinese companies.

Advanced technology: The Bureau of Industry and Security (BIS) under the Department of Commerce is responsible for U.S. export controls and is the most important functional department in the U.S.-China technology game. The House Foreign Affairs Committee reviewed it for three months. A more than 60-page report was released on Thursday (November 7), criticizing the bureau in many aspects, such as the too-high approval rate for controlled technology transfer, too-slow action, and almost no way to inspect the end use. criticism and raised serious doubts about the current export control mechanism of the United States.

“We can no longer avoid the truth: the unimpeded transfer of U.S. technology to China is one of the biggest contributors to its becoming a world-leading technology power,” the report states clearly at the outset.

‘Overwhelming’ approval of controlled technology transfers

The bombshell report released Thursday by Republican Congressman Michael McCaul, chairman of the Foreign Relations Committee, said that the Bureau of Industry and Security approved controlled technology transfers by an “overwhelming” majority and approved transfers to entities on the Entity List. The company transfers controlled or uncontrolled technology.

The U.S. Department of Commerce Control List (CCL) is one of the most important mechanisms for the United States to implement export controls on sensitive technologies. All items on the list may be used for military purposes. The House of Representatives report said, “In 2020, nearly 98% of CCL projects were exported to China without a license.” And even when a license is required, data shows that the Bureau of Industry and Security almost never refuses.

The Wall Street Journal also reported last year, based on an analysis of U.S. Department of Commerce data, that the United States approved almost all technology exports to China. According to reports, the total amount of U.S. exports to China in 2020 was US$125 billion, of which less than 0.5% required a license, and the Department of Commerce approved 94% (or 2,652) of the technology export applications.

The review found that the Bureau of Industry and Security approved licenses worth $60 billion to Huawei during the six-month period from November 2020 to April 2021, despite Huawei and SMIC being blacklisted. license and approve a $40 license.

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A media report in 2021 also found that the United States had approved as many as 113 export licenses for Huawei. However, there are signs that this situation has improved significantly. Reuters reported earlier this year that the Biden administration has stopped approving licenses for U.S. companies to export most products to China’s Huawei, according to three people familiar with the matter.

Synopsys, Inc. in the United States is the world’s number one chip automation design solution provider and the world’s number one chip interface IP supplier. It has branches in Beijing, Shanghai and other cities. The company has been under investigation by BIS for allegedly violating export control regulations on shipments to Semiconductor Manufacturing International Corporation and Huawei, but the House report said that so far, BIS does not appear to have taken any action against Synopsys.

Bloomberg News reported on Sunday (December 10), citing the latest research results of technology research company Tech Insights, that Huawei’s Mate 60 Pro smartphone has shown “significant progress” in the design and engineering of domestic radio frequency chips in China. According to reports, the phone includes a radio frequency switch from Maxscend Microelectronics Co. and a power amplifier module from Beijing Anxin Microelectronics Co., Ltd. These two components are usually manufactured by the U.S. suppliers Skyworks Solutions Inc. and Qorvo Inc.

The House of Representatives report said that China is now considered capable of producing 7-nanometer chips, and SMIC’s breakthrough is considered to almost certainly require the use of U.S. technology, which should constitute an export control violation, but BIS has not taken action.

A research report on Monday (December 11) by the science and technology information (advanced technology) website “Digital Times” said that although the United States continues to update export controls, it has had little effect in preventing China’s semiconductor development. The report said that before the United States tightened export controls, Chinese semiconductor companies had acquired a large number of semiconductor chips and equipment. In addition, black markets or smuggling also threaten the effectiveness of U.S. export restrictions. Experts from “Digital Times” believe that the United States will only slow down the development of China’s semiconductor industry, and it is almost impossible to prevent China from strengthening its semiconductor strength.

The new laptop computer recently launched by Huawei is said to be equipped with an advanced chip using 5-nanometer manufacturing technology, but some media pointed out that there is a high possibility that this chip will use old TSMC inventory in 2020.

It’s almost impossible for the U.S. to check Chinese terminal usage

Advanced technology: Under the U.S. export control system, export enforcement officers from the Bureau of Industry and Security are responsible for conducting on-site visits and conducting end-use inspections of products and technologies subject to export management regulations, but the congressional report found that the agreement between the two countries was seriously insufficient. With the various restrictions imposed by China, it is actually difficult for the United States to know to which company the products and technologies are sold or for what purpose.

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Data obtained by House Foreign Affairs Committee staff shows that the time from a U.S. request to inspections can take more than 100 days, when ideally they should occur within 24 hours of a request.

Congress reported that between 2016 and 2021, the U.S. government’s two export control officials in China conducted an average of only 55 end-user inspections per year, when China had about 4,000 active licenses. In other words, BIS may verify less than 0.01% of all trade licenses.

Under a 2004 U.S.-China agreement, the bilateral end-use inspection agreement allows only one full-time export control officer to conduct pre-shipment inspections and post-shipment verification in China. The report notes that the current end-use inspection agreement between the two countries severely limits the Bureau of Industry and Security’s ability to conduct inspections and recommends that the Department of Commerce renegotiate the end-use agreement with China.

Yu Weixiong, an economics professor at the Anderson Forecast Center at the University of California, Los Angeles (UCLA), said that many U.S. bans only ban China, but China will obtain these chips through third countries and bypass the U.S. ban. He told Voice of America: “For example, some countries in the Middle East can set up companies there and buy high-end chips from the United States. One can transfer them back to China or do some research and development there. .”

Thomas Duesterberg, a senior fellow at the Hudson Institute, a think tank in Washington, said China is very adept at circumventing controls. Moving to a new address and masking its name in an attempt to circumvent controls.”

Insufficient resources or a lack of political will?

Advanced technology: Although the Bureau of Industry and Security shoulders the historic responsibility of ensuring that the United States maintains a leading edge in the escalating U.S.-China technology game, the Bureau is small, one of 13 bureaus within the Department of Commerce, with only more than 300 employees.

U.S. Commerce Secretary Gina Raimondo has recently repeatedly called on Congress to provide more funding for BIS.

When she attended the annual defense forum “Reagan National Defense Forum” earlier this month, she said that China is “the greatest threat we have ever faced” and “we cannot let China obtain these chips.” However, the agency’s funds Not enough; already overwhelmed. “I only have a budget of $200 million. That’s the cost of several fighter jets,” Raimondo said. “Please, let’s give this project the funding it deserves.”

In an exclusive interview with Foreign Policy last Friday, Raimondo once again called on the Commerce Department to be stretched beyond its capacity and urgently need to expand its budget. She said the agency’s budget is roughly the same as it was a decade ago, “yet our permit applications have doubled; permit applications have literally doubled,” Raimondo said.

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However, on the other hand, the review report of the Congressional Foreign Affairs Committee pointed out that in the BIS budget request for fiscal year 2024, the bureau did not request sufficient funds and resources. In addition, the bureau did not have sufficient opportunities to utilize its existing resources.

House Foreign Affairs Committee Chairman Michael McCaul, House Republican Conference Chairman Elise Stefanik, and House Select Committee on Strategic Competition between the United States and the Chinese Communist Party Mike Gallagher said in a recent statement that shortcomings in U.S. export controls cannot be addressed by providing resources alone.

“Revoking Huawei’s export license, adding subsidiaries of BGI and Inspur to the Entity List, or cutting off SMIC’s technical ties with the United States are not a matter of money; they depend on political will,” the MPs stressed in their statement.

Dustberg, a senior researcher at the Hudson Institute and a former official of the Ministry of Commerce, said that China is a big country and involves an extremely wide range of technical issues. In terms of the resources of the Ministry of Commerce, the mission it shoulders is undoubtedly extremely heavy. He told the media that BIS has indeed achieved some success in some areas. For example, the ban on advanced semiconductors has prevented China from obtaining the most advanced technologies of American technology companies. “But as the report emphasizes, policymakers have It is also true that many of the activities that were hoped to be restricted are not being restricted.”

Advanced technology: The entity list is considered an important means for the United States to control exports in order to safeguard its national security. The Bureau of Industry and Security has a “Validated End-User” (VEU) for countries such as China. Authorized companies can export restricted items without applying for a specific license. Currently, Samsung Electronics and SK Hynix can supply U.S. semiconductor equipment to Chinese factories. In addition, Reuters reported in October this year, citing TSMC, that TSMC is also expected to obtain U.S. licenses.

According to the BIS website, “Verified End Users” are designed to enhance high-tech trade between the United States and eligible countries. It is expected that “verified end users” will ease the geopolitical pressure faced by the three chip foundries, TSMC, Samsung Electronics, and SK Hynix, operating in China.

Yu Weixiong of the University of California, Los Angeles, said that the United States’ increasingly strict export controls in recent years have undoubtedly restricted China’s technological rise. Huawei mobile phone chips cannot be compared with the most advanced technology, but now “the point is not that there is no impact. But the impact is not enough, and there are still many loopholes.”

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