US lawmakers fire back at government's chip sanctions against China, alleging glaring loopholes that let China access the latest technology

Although the latest U.S. export rules prohibit shipments of advanced chipmaking tools to many China-based fabs, making it harder to produce sophisticated chips in the People's Republic, they still contain loopholes that allow Chinese semiconductor makers to procure sophisticated technology. The main drawback of the new export rules is that they are still based on a fab-by-fab approach rather than entity-by-entity approach. 

John Moolenaar, the chairman of House Select Committee on the CCP, wrote a letter [PDF] to Gina Raimondo, Secretary of U.S. Department of Commerce, praising the placement of some of Huawei's semiconductor facilities to the Bureau of Industry and Security's (BIS) Entity List and adding controls on high-bandwidth memory (HBM) technologies, but criticizing the loopholes that continue to exist in the new export rules, weakening their effectiveness. 

In particular, the new 'License Exception Restricted Fabrication Facility' policy inconsistently applies restrictions across facilities, Moolenaar wrote. For instance, SMIC Beijing — which makes chips on 28nm – 180nm-class process technologies — is subject to stringent denial policies. However, SMIC Shanghai — which operates the company's leading-edge Fab SN1 that can produce chips at 6nm-class process technology as well as mature 200-mm Fab 1 that makes chips at 90nm – 350nm nodes — can still produce 200mm wafers without any curbs and therefore procure appropriate equipment without restrictions. The two fabs are connected by a wafer bridge, which allow to transfer items between fabs, he noted. Meanwhile, export license applications to SMIC Shenzhen are again reviewed under presumption of denial except case-by-case. 

"We have long known this is a problem, with a recent report finding that SMIC had used a 'wafer bridge' to connect their two facilities — one with a harsh BIS licensing policy, the other with more lax restrictions," Moolenaar wrote. "SMIC could easily use such a tunnel to transfer sensitive U.S. technology between facilities, in violation of U.S. export control law. BIS needs to establish stronger, not weaker, counter-diversion restrictions for facilities near each other." 

It should be noted that the case-by-case export restrictions for SMIC Shanghai are only applied to 200-mm equipment and while some tools can be used both for 300-mm and 200-mm wafers, the most critical tools are 300-mm only and these can no longer be shipped to SMIC's legacy Fab 1. 

Huawei affiliates also benefit from exceptions, Moolenaar observes. Si'En Qingdao faces strict licensing policies, but firms like SwaySure Technology and Shenzhen Pengxinxu Technology continue to access specific U.S. technologies, the letter asserts. Also, ChangXin Memory Technologies (CXMT), which makes HBM2 memory for AI and HPC applications, remains unaffected by these rules despite their strategic significance. 

The letter emphasizes the need for tighter, uniform restrictions to prevent circumvention and suggests that BIS's actions might be influenced by pressure from American makers of wafer fab equipment (WFE). Furthermore, it requests preservation of all relevant documents to enable the next administration to discover potential loopholes and address remaining vulnerabilities. 

While the new U.S. export rules modifies the license review policies for entities affiliated with actual chipmakers, such as SMIC, and make it harder to procure advanced tools, their main purpose is to restrict development of chipmaking tools in China. China makes rapid strides into this realm and has even produced some competitive etching tools, so the concerns of the U.S. government are justified. To that end, the new export rules have added as many as 140 Chinese entities into the Entity List, which restricts dealing with them by American companies.