US Lawmakers Warn Global Chip Firms Are Fueling China's Military Rise

The months-long investigation, led by Select Committee Chairman John Moolenaar (R-Michigan) and Ranking Member Raja Krishnamoorthi (D-Illinois), found that companies including ASML of the Netherlands, Tokyo Electron (TEL) of Japan, and US-based firms Applied Materials, KLA, and Lam Research have generated substantial revenues by selling critical equipment to Chinese state-owned and military-linked entities.

"These companies are large-scale producers of equipment that China is using to fuel its military ambitions," Chairman Moolenaar said, as cited by the SCCCP release. He warned that firms were "growing their profits at the expense of US national security," adding that allowing such equipment transfers could cause the United States to lose the global technology arms race.

Ranking Member Krishnamoorthi said it was illogical to sell China not only advanced chips but also the machinery required to manufacture them domestically. "This bipartisan investigation reveals that the scale of these sales by Dutch, Japanese, and American firms is even more vast than we realized," he said, according to the release.

The committee highlighted striking revenue figures for 2024, noting that TEL derived 44 percent of its revenue from China, while Lam Research earned 42 percent, KLA 41 percent, and ASML and Applied Materials each received 36 percent of their revenue from Chinese customers, as stated in the SCCCP press release.

The investigation also found that SME firms continued sales to entities with known links to China's military and intelligence apparatus. Five companies designated by the US government as posing serious national security risks were identified as top customers of SME makers, including firms associated with Huawei, the committee said.

According to the SCCCP, sales to Chinese state-owned enterprises (SOEs) have increased sharply. In 2022, SME companies sold equipment worth USD 9.5 billion to PRC SOEs, accounting for 11 percent of overall revenue. By 2024, that figure had surged to USD 26.2 billion, representing 27 percent of total revenue and nearly 69 percent of PRC-based revenue.

The investigation further noted that as the United States imposed export controls, Dutch and Japanese firms expanded their revenues from Chinese entities. It also warned that Beijing appeared to be stockpiling lithography equipment just below the technical thresholds covered by current export restrictions, according to the SCCCP release.

Lawmakers cautioned that China's semiconductor development poses multiple threats to US national security, including the potential use of advanced chips in People's Liberation Army weapons systems, increased economic leverage over global supply chains, and the use of artificial intelligence and high-performance computing to facilitate human rights abuses and digital authoritarianism.

"The ability to design and produce semiconductors lies at the heart of the technology competition with China," the committee said, describing SME as a crucial chokepoint that the US and its allies must preserve rather than "squander," as cited in the release.

To address these risks, the SCCCP outlined several policy recommendations, including aligning Dutch and Japanese export controls with US restrictions, expanding country-wide controls on China, widening the list of restricted Chinese military entities, tightening controls on SME components, and creating a new whistleblower export control programme.

The committee also called for increased resources for the US Commerce Department's Bureau of Industry and Security and the State Department, as well as stronger government-industry coordination to ensure continued US and allied leadership in semiconductor manufacturing equipment.

"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," Chairman Moolenaar and Ranking Member Krishnamoorthi said, as quoted in the SCCCP press release.

- ANI