East Michigan News

A recent investigation by the House Select Committee on the Chinese Communist Party (CCP) has found that companies from the United States and allied countries have played a significant role in supporting China's semiconductor industry. The committee, led by Chairman John Moolenaar (R-MI) and Ranking Member Raja Krishnamoorthi (D-IL), identified firms such as ASML in the Netherlands, Tokyo Electron (TEL) in Japan, and Applied Materials, KLA, and Lam Research in the United States as key suppliers of semiconductor manufacturing equipment to China.

According to the committee's findings, these companies have made substantial profits by selling equipment to Chinese state-owned and military-linked entities. Chairman Moolenaar stated, "The Select Committee has revealed that companies in this investigation are large-scale producers of equipment that China is using to fuel its military ambitions. They are growing their profits at the expense of U.S. national security. We must not allow this critical equipment to be handed over to our foremost adversary, or America could lose the technology arms race."

Ranking Member Krishnamoorthi added, “It makes little sense to sell the CCP the chips they need to modernize their military and violate human rights. But it makes even less sense to sell them the machines and tools they need to produce those chips themselves. This bipartisan investigation reveals that the scale of these sales by Dutch, Japanese, and American firms is even more vast than we realized. Alongside our allies, we need to protect our national security and ensure we remain the world’s leading innovators in SME."

The committee reported that in 2024, TEL derived 44% of its revenue from China, Lam Research 42%, KLA 41%, and both ASML and Applied Materials 36%. Sales to Chinese state-owned enterprises (SOEs) also increased significantly. In 2022, these companies sold $9.5 billion worth of semiconductor manufacturing equipment (SME) to PRC SOEs, accounting for 11% of overall revenue and 42% of PRC-based revenue. By 2024, this figure rose to $26.2 billion, representing 27% of overall revenue and 69% of PRC-based revenue.

The investigation found that several customers of these SME makers are entities identified by the U.S. government as serious national security risks, including associates of Huawei. The report also noted that Dutch and Japanese firms increased their revenues from PRC entities as U.S. export controls tightened. Additionally, it appears that China is stockpiling lithography equipment just below current restriction thresholds.

In correspondence with the companies involved, Moolenaar and Krishnamoorthi warned about the consequences of supporting China's semiconductor ambitions: “[t]he PRC is now the largest market for semiconductor manufacturing equipment, and it is stockpiling semiconductor manufacturing equipment to bolster its national self-sufficiency in a long-term competition with the United States.”

The committee highlighted several concerns related to China's advances in semiconductor technology. These include military applications such as chips for PLA weapons systems used in AI-driven warfare; economic risks if China achieves dominance in chip manufacturing; trade implications as China seeks a self-sufficient industry; and human rights abuses enabled by advanced computing technologies.

The report emphasized the strategic importance of controlling access to SME technology: "The ability to design and produce semiconductors lies at the heart of the technology competition with China, and SME represents a crucial chokepoint that the U.S. and our allies currently have over China. As the U.S. government works with our allies and partners and plots the course ahead on export-control policy and related actions, this crucial chokepoint must be preserved, not squandered." It further stated that “[t]he U.S. and allies only have the ability to export-control SME because we collectively are the world’s leading innovators in SME. We must double down on our success.”

To address these issues, the investigation recommends aligning export controls among allied nations with U.S. restrictions, expanding controls to cover more entities and components, creating a whistleblower program for export control violations, increasing resources for enforcement agencies, and supporting innovation within U.S. SME firms.

Moolenaar and Krishnamoorthi concluded: “It is far past time that the Toolmakers start treating the CCP and its national champions as threats to their corporate longevity, rather than as valued customers.”

The full report is available online.