U.S. widens ban on military and surveillance tech sales to China

U.S. imposes tough rules to limit China’s access to high-tech chips

The administration also blacklisted a company that The Washington Post recently reported facilitated sales of U.S. technology to military institutes involved in China’s hypersonics and missile programs.

The moves come a month after President Biden and Chinese President Xi Jinping met in Bali and sought to put a “floor” under the downward spiraling relationship. Beijing has accused the administration of “abusing” export controls to “wantonly block and hobble” Chinese enterprises and to “maintain its sci-fi hegemony.”

The 36 companies placed on the Entity List are effectively barred from receiving U.S. technology. All but one, which is a Chinese subsidiary located in Japan, are in China. And significantly, 21 of those newly listed firms are also being hit with a further control — known as the foreign direct product rule (FDPR) — that bars foreign companies from selling to the Chinese entities goods that are produced with American technology or equipment.

“Today we are building on the actions we took in October to protect U.S. national security by severely restricting the [People’s Republic of China’s] ability to leverage artificial intelligence, advanced computing, and other powerful, commercially available technologies for military modernization and human rights abuses,” said Alan Estevez, undersecretary of commerce for industry and security. “This work will continue, as will our efforts to detect and disrupt Russia’s efforts to obtain necessary items and technologies for its brutal war against Ukraine, including from Iran.”

The most high-profile company listed is Yangtze Memory Technologies Co. (YMTC), a Chinese “national champion” that makes memory chips used to store data, which are vital to consumer goods but also emerging technologies such as artificial intelligence, 5G communications and cloud computing — fields that are key to China’s goals of achieving technological dominance and a world-class military.

Earlier this year, the Financial Times reported that the Biden administration was investigating reports that YMTC appeared to have violated U.S. export controls by selling chips made with American technology to Huawei, a Chinese tech giant that has been on the Entity List since 2019 and more recently subjected to the foreign direct product rule.

The administration feared that YMTC might sell chips to other companies on the Entity List, Commerce said. Among those companies, according to the rule the Commerce Department issued Thursday, were Huawei and Hikvision. Hikvision was put on the Entity List in 2019 for “activities related to human rights violations and abuses” in China’s Xinjiang region.

Entity List decisions are made jointly by the Commerce, State, Defense and Energy departments.

YMTC’s designation is largely symbolic, analysts said, in that the rules rolled out in October by Commerce already barred U.S. companies and individuals from supporting firms that make chips with 128 layers of NAND flash memory and above. YMTC recently announced that its fourth-generation 3D NAND chip contains 232 layers of memory.

“They’re basically already entity listed and subject to something like a foreign direct product rule — just under a different name,” said Kevin Wolf, a former assistant secretary of export administration at the Commerce Department.

The Oct. 7 rules prompted some U.S. suppliers to halt installation of new equipment at YMTC facilities. China filed a dispute over chip-related trade restrictions this week with the World Trade Organization.

In technological prowess, YMTC still lags global rivals such as Micron of the United States and Samsung of South Korea, but it has made progress closing the gap in recent years.

The blacklist included several other firms of note, including “PXW Semiconductor Manufactory Co.” in Shenzhen. Known in China as Pengxinwei IC Manufacturing Co., it is run by a former Huawei executive and is building a plant near Huawei’s headquarters. Some industry insiders have said they suspect that the plant was being built to help the tech giant evade export controls.

Another is Shanghai Micro Electronics Equipment Group, a key player in Beijing’s semiconductor ambitions and the only Chinese firm capable of producing advanced lithography equipment, which is used in the development of high-end semiconductors.

Also listed was Tianjin Tiandi Weiye Technologies, one of China’s biggest surveillance firms, which provided technology and training to police in Xinjiang during a multiyear crackdown on ethnic Uyghurs. The firm, which has an expansive overseas presence, also sold surveillance tools to authorities in Russia and Iran.

The administration took aim at a number of research labs that work on aerospace and missile technology, including Beijing Hifar Technologies, a military technology supplier that The Post reported resold U.S. aerospace software to a top Chinese missile group. The group was instrumental in the design of China’s 2021 hypersonic missile test, according to two Chinese military scientists familiar with the program.

The test alarmed U.S. military and intelligence officials. It was part of a broader strategic and nuclear weapons buildup: The Pentagon recently warned that China conducted more ballistic missile tests last year than the rest of the world combined and is on course to possess 1,500 nuclear weapons within the next decade.

American technology boosts China’s hypersonic missile program

Commerce also blacklisted a Chinese firm that it says facilitated the illegal export of U.S. electronics to Iran to build drones and missile systems. Russia’s military has been using Iranian-made drones to attack Ukraine, according to U.S. and Ukrainian officials.

The administration on Thursday added nine Russian parties to the export blacklist after they didn’t fully submit to U.S. government inspections. And it slapped the FDPR on two Chinese firms that were blacklisted in 2018, for supporting Russia’s military since the imposition of export controls earlier this year.

The application of the foreign direct product rule to 23 entities — following a similar move in October against 28 Chinese entities — is notable, analysts say. The FDPR was initially imposed to stanch the flow of tech support to Huawei by requiring even overseas companies to abide by the export restriction if they used U.S. tools or technology in making their product.

Then, in a novel move, it was used to counter Russia’s aggression against Ukraine. The October FDPR targeted companies that provide support to advanced computing applications like AI. The new application of the FDPR will target AI and chip entities that support the Chinese military and defense industry.

“This clearly showcases that the United States is getting more comfortable with more liberal usage of the FDPR,” said Reva Goujon, a director with the Rhodium Group research firm. “It’s also a signal to partners that the U.S. is willing to apply those extraterritorial measures if necessary.”