Adding China’s National Champion Chipmakers to NDAA Procurement Ban Makes Good Sense

Andy Keiser

In two previous Center for the Study of the Presidency and Congress (CSPC) papers here and here, we called for a series of recommendations against the Chinese domestic semiconductor (chips) industry as a matter of national and economic security.

Chinese-made chips are already in critical U.S. supply chains, including defense systems. Every day that goes by absent common-sense restrictions creates more potential for failure, espionage or sabotage.

Thankfully, in recent weeks, there has been a flood of new U.S. government export controls targeting the Chinese government-backed semiconductor industry – primarily coming out of the Commerce Department’s Bureau of Industry and Security (BIS). These actions are bold, comprehensive, and intended to prevent cutting-edge exports to a range of Chinese technology companies and cut off China’s ability to produce advanced chips itself.

Seemingly lost in the debate, however, has been important legislative action occurring in the Fiscal Year 2023 National Defense Authorization Act (NDAA). Leading China hawks Senators Chuck Schumer and John Cornyn got their amendment included in the manager’s amendment to the Senate version of the NDAA to add China’s three national champion chipmakers: Semiconductor Manufacturing International Corporation (SMIC), ChangXin Memory Technologies (CXMT), and Yangtze Memory Technologies Corp. (YMTC) to Sec. 889 of the Fiscal Year 2019 NDAA.

Sec. 889 of the 2019 NDAA created a federal procurement prohibition on telecommunications equipment or services from Huawei and ZTE, and surveillance equipment or services from Hikvision, Hytera and Dahua. This action was important to protect the integrity of critical telecommunications networks in the United States and protect Americans’ privacy.

Sec. 889 was also necessary to prevent taxpayer funding to Chinese Communist Party backed “national champions” who have known ties to China’s military and intelligence services and are complicit in gross human rights violations such as the Uighur genocide in Xinjiang province currently taking place. Chinese state backed chip makers are complicit and SMIC is already on the Department of Commerce’s Entity List.

As we discussed in previous CSPC papers, semiconductors are a critical national security commodity upon which the United States should not be forced to rely on our primary geopolitical adversary. The absence of semiconductor technology in Section 889 is an obvious omission from the larger macro policy efforts in Washington looking to reduce reliance China for critical components up and down the supply chain. Perhaps most concerningly, vulnerabilities introduced during the production of semiconductors can create an acute risk of compromise that could lead device failure or exfiltration of sensitive data.

While we should continue to push to add YMTC and CXMT to the Entity List, this Schumer/Cornyn amendment to the FY23 NDAA will bolster Section 889 to include these CCP-controlled semiconductor national champions and empower the interagency to identify any others with links to hostile foreign adversaries and then exclude them — using a flexible, effective, fair, and responsive tool already established under Sec. 889.