McCaul, Cotton Ask Administration to Restrict Sale of Chip-Making Software to ChinaPress Release
Washington, DC – House Foreign Affairs Committee Lead Republican Michael McCaul (R-TX) and U.S. Senator Tom Cotton (R-AR) sent a letter to U.S. Secretary of Commerce Gina Raimondo urging tighter restrictions on the sale of chip-making tools to China. The members argue that electronic design automation (EDA) tools, which are used to design semiconductor chips, should require a license for all end-users under the ownership, influence, or control of the People’s Republic of China.
“According to a recent report by The Washington Post, sophisticated U.S. EDA software was sold to an ostensibly civilian PRC company, Phytium Technology. Phytium then used this software to design advanced semiconductor chips for supercomputers at a hypersonic weapons research and testing facility run by the People’s Liberation Army (PLA). This facility, the China Aerodynamics Research and Development Center (CARDC), has been on the Commerce Department’s Entity List for more than two decades. Despite Phytium’s deep ties to PRC military research and its sales to the CARDC, Phytium was only added to the Entity List after The Washington Post report. We find it deeply troubling that the Department of Commerce allowed such a critical U.S. technology to be harnessed to design weapons targeting American servicemembers operating in the Indo-Pacific,” the lawmakers wrote.
The full letter can be found here and below.
Dear Secretary Raimondo,
We write to urge you to designate electronic design automation (EDA) tools as a foundational technology and require a license for all end-users under the ownership, influence, or control of the People’s Republic of China (PRC). There is clear evidence that companies linked to the Chinese Communist Party (CCP) military are using this software technology to develop advanced weaponry.
According to a recent report by The Washington Post, sophisticated U.S. EDA software was sold to an ostensibly civilian PRC company, Phytium Technology, to design advanced semiconductor chips that would be used in supercomputers at a PRC military-run hypersonic weapons research and testing facility. This facility, the China Aerodynamics Research and Development Center (CARDC), has been on the Commerce Department’s Entity List for more than two decades. Despite Phytium’s deep ties to PRC military research and its sales to the CARDC, Phytium was only added to the Entity List after The Washington Post report. We find it deeply troubling that the Department of Commerce allowed such a critical U.S. technology to be harnessed to design weapons targeting American servicemembers in the Indo-Pacific.
As you know, the Chinese Communist Party (CCP) is executing a strategy called “Military-Civil Fusion” (MCF) which seeks to eliminate the distinction between its defense and civilian sectors. The goal of this strategy to ensure that the People’s Liberation Army can rapidly develop and field cutting-edge military platforms. Because the MCF is turning the PRC economy into a military-driven ecosystem that is centrally coordinated by the CCP, many American and other non-PRC businesses are knowingly or unknowingly exporting sensitive technologies that are promptly handed over to the CCP military or intelligence services.
This recent Phytium example is not the first time a CCP military company has been documented relying on U.S. EDA tools to design advanced semiconductors. In 2019, Commerce took the decisive step of effectively banning the export of EDA tools to HiSilicon, a Huawei subsidiary that designs their advanced semiconductors. This ban on exports of EDA tools to Huawei was intended to impede HiSilicon’s ability to design semiconductors that are used to further the CCP’s ambitions of dominating global 5G telecommunications networks.
The Huawei Entity Listing and ban on EDA software has done nothing to restrict other PRC companies from buying EDA software licenses from the two dominant suppliers, Cadence and Synopsys. According to reports, hundreds of companies run by PRC regional governments poured investments into fabless semiconductor producers and mass purchased EDA software licenses from these two U.S. companies. This has contributed to significant sales growth of EDA tools in the PRC by Cadence and Synopsys. Synopsys even hosted a design training session at the PLA National University of Defense and Technology on integrated circuit and field programmable gate array, semiconductors with clear military applications.
The U.S. government’s recent strategy against Huawei and Phytium’s sale to CARDC demonstrates the distinct drawbacks of a end-user based approach to export controls when dealing with the CCP. It must be presumed that any PRC company that accepts state-directed investments to purchase semiconductor technologies, including EDA software licenses, could easily be coerced or induced to perform the functions for Huawei or the CCP military that HiSilicon had, before it was targeted by U.S. export bans. The export of advanced dual-use U.S. technology to any PRC entity is effectively a direct delivery to the People’s Liberation Army. Our export control system should reflect this reality.
Accordingly, we urge you to take the following actions to ensure U.S. companies as well as those from parter and allied countries are not permitted to sell the communists the rope they will use to hang us all.
- While we support reports that the Department of Commerce is placing Phytium on the Entity List—we hope with a licensing policy of a presumption of denial—the Commerce Department must supplement this action with a Foreign-Direct Product Rule (FDPR) Footnote number 1. An entity listing would restrict sales of EDA tools to Phytium, but a FDPR Footnote number 1 would require any fab globally that uses American tools to obtain a Bureau of Industry and Security (BIS) license to fabricate a Phytium-designed semiconductor chip. Anything short of using the FDPR would be a half measure masquerading as a forceful action.
- The Department of Commerce should immediately designate EDA software as a Foundational Technology, which would require all U.S. EDA companies to get a BIS license before exporting any product to the PRC. The Department of State and Commerce should also propose similar controls at the Wassenaar Arrangement.
- BIS should also develop a FDPR footnote number 1 that applies to any PRC company designing semiconductor chips at or below 14nm. This would ensure that no fab with American tools could make a 14nm or below chip for any PRC company without first obtaining a BIS license.
- The Department of State and Commerce must engage the Taiwanese government to develop a more effective end-user screening system to mitigate the risk of Taiwanese companies providing services and technologies to entities of concern. It is not in the security interests of Taiwan or the United States for companies like Taiwan Semiconductor Manufacturing Corporation to make advanced semiconductor chips for the PRC’s military.
Thank you for considering this important matter of national security. We look forward to hearing from you.