The US Congress has introduced a new act to prevent the Chinese and “other foreign entities of concern” from infiltrating the US’s domestic chipmaking industry.
The bill, the Chip Equipment Quality, Usefulness, and Integrity Protection Act of 2024 (Chip EQUIP Act), follows on from the CHIPS and Science Act, enacted in 2022, which earmarked roughly $280 billion in new funding to boost US domestic research and manufacturing of semiconductors. It included $39 billion in subsidies plus tax breaks for US chipmakers. However, China has recently matched this with a new $40 billion investment in its own semiconductor industry, which will heavily focus on chip manufacturing equipment. In April, Chinese tech giant Huawei announced investing in new R&D capabilities to rival US, Japanese, and Dutch firms.
The US Congress has now responded to China’s move by introducing new legislation to prevent companies that receive CHIPS and Science Act funding from purchasing specialized semiconductor manufacturing tools or equipment “made or controlled by the New Axis of Evil — Communist China, Russia, North Korea, and Iran.”
Today, nearly all the specialized tools and equipment used throughout the semiconductor manufacturing supply chain are made in the US or allied nations such as Japan and the Netherlands. And, although demand is surging for Chinese-made semiconductor tools, the domestic US semiconductor industry is not facing any direct threat from the countries that make up the “New Axis of Evil” or China itself. Congress is determined to make sure things stay that way.
“Having a strong domestic semiconductor industry is critical to our economic success and our national security. The Chinese Communist Party has a stranglehold on these markets, and it’s imperative that we catch up,” says Frank Lucas, House Science, Space, and Technology Committee chairman.
Major threat to US national security
“American taxpayer dollars should not be used to purchase Communist Chinese semiconductor manufacturing equipment when the same tools are made in America,” adds Senator Marsha Blackburn.
While the announcement from Congress is couched in protecting US industry and jobs, there is also an unspoken sub-text regarding the major threat China’s surging semiconductor industry could pose to US national security. Steel and coal production formed the sinews of war in the first half of the Twentieth Century. In today’s digital age, however, semiconductor manufacture is crucial in developing and manufacturing modern weapons and is crucial to US defense capability. There are also mounting concerns regarding national cybersecurity.
The new bill follows US President Joe Biden’s announcement earlier this year, accusing China’s auto industry of posing a serious cyber risk to US national security. An impassioned speech from the President concerning the cyber threat posed by China came only weeks after a similar warning from the US Federal Bureau of Investigation (FBI) concerning China’s plans to launch a cyber-attack on US national infrastructure. Biden cited concerns that the digital technology now routinely installed in Chinese-made cars could be used to spy on US organizations and private citizens by China’s regiments of cyber spies.
Similar concerns surrounding the Chinese semiconductor industry now doubtless underpin the Chip EQUIP Act, including fears that Chinese semiconductor technology could contain embedded spyware.
