Congress is warning that billions of dollars’ worth of advanced semiconductor equipment is continuing to flow to China, undermining U.S. efforts to slow Beijing’s technological rise – and some of those semiconductors are coming from America.
That’s according to a new report published Tuesday from the Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party. After a months-long investigation, lawmakers pointed to $38 billion in semiconductor manufacturing equipment (SME) that was sent to China in 2023, making up more than half of the world’s total exports of those tools.
Despite sweeping export controls from Washington on restricting SME from being sold to certain China-based companies, lawmakers said that China continues to buy equipment from the United States, Japan, and the Netherlands.
“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,” said Chairman John Moolenaar, R-Mich., in a statement.
Companies that have sold SME to China include ASML in the Netherlands; Tokyo Electron (TEL) in Japan; and Applied Materials, KLA, and Lam Research in the United States.
“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,” reads the report. “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.”
Continued sales pose national security and economic risks, warned committee lawmakers, saying that Chinese firms under sanctions were still able to access key chips through third-party resellers and loopholes in export laws.
Five restricted semiconductor companies based in China were the top customers of SME manufacturers from 2022 to 2024.
While some U.S. companies continued to provide SME to China, the report noted that non-U.S. SME providers are less restricted than American companies, with lawmakers suggesting that “U.S. export controls have created an unlevel playing field where the non-U.S. Toolmakers are empowered to sell billions of dollars of SME per year to restricted entities.”
To address this, the committee recommended that the United States and its allies tighten semiconductor exports to China, warning that existing controls are too narrow and inconsistent. Broader, more coordinated restrictions that cover advanced chips, software, and research partnerships would be more secure.
It also recommended a whole-of-government approach to protect critical technologies, including the creation of a national technology security strategy to align economic and security policies.
Meanwhile, closer coordination among allies could help close export loopholes, and monitoring downstream sales could catch third-party resellers and improve government intelligence-sharing efforts.
“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,” said Ranking Member Raja Krishnamoorthi, D-Ill., in a statement. “Alongside our allies, we need to protect our national security and ensure we remain the world’s leading innovators in SME.”