November 17, 2022 | Defense One

Ban These Chinese Chipmakers from Pentagon Purchases

Congress should pass a proposed expansion of the law that keeps the federal government from buying certain companies’ products.
November 17, 2022 | Defense One

Ban These Chinese Chipmakers from Pentagon Purchases

Congress should pass a proposed expansion of the law that keeps the federal government from buying certain companies’ products.

American chipmaking companies and government focus are finally putting the United States back on the offensive in the semiconductor field. This is a welcome development, but it must be paired with a good defense, which starts with ensuring that federal government networks are free of Chinese-made chips that pose a national-security risk to the United States.

Congress could, and should, do just that as it negotiates a final defense authorization bill in the coming weeks. A provision in the Senate’s version of the annual defense-policy bill would expand the Section 889 government procurement ban to cover chips made by high-risk Chinese companies.

Section 889, a provision in the 2019 National Defense Authorization Act, or NDAA, prohibits the federal government from obtaining telecommunications and surveillance equipment or services from certain entities, including those the Defense Department has identified as Chinese military companies, like Huawei and Hikvision. The law also prohibits the federal government from contracting with companies that make significant use of the equipment and services of these Chinese entities.

The Section 889 expansion that focuses on semiconductors, which was proposed by Senators Chuck Schumer and John Cornyn, is in Section 5871 in the Fiscal Year 2023 NDAA substitute amendment filed in the Senate on October 11. Like the existing ban it seeks to amend, the proposed prohibition would have two elements, both of which are critical to its effectiveness.

The first element will prevent the federal government from purchasing and using goods that contain Chinese chips made by Semiconductor Manufacturing International Corporation, or SMIC; ChangXin Memory Technologies; or Yangtze Memory Technologies Corp., or YMTC. Given the evolving nature of China’s semiconductor industry and its proclivity to “re-imagine” named entities and provide them with new names, the provision also includes “any subsidiary, affiliate, or successor” of these companies.

The language also gives the defense secretary, in consultation with the director of national intelligence, the discretion to extend the ban to other Chinese chip companies of concern. This underscores that risk mitigation related to Chinese semiconductors must account not just for today’s environment, but for Beijing’s long-term strategy and future industrial ambitions.

The second element of the new provision will encourage federal contractors to eliminate the use of Chinese chips made by the listed companies in any “substantial or essential” parts of their systems. This should be a simple choice for companies: you can do business with the federal government or you can have a significant dependence on Chinese chips, but you cannot do both. Companies that choose the latter path, placing U.S. security at risk, will be ineligible for government contracts.

In a show of considerable—perhaps excessive—flexibility, the prohibition would only kick in three years after the language becomes law.

The prospects for passing the language remain unclear as the Senate and House negotiate over a final version of the NDAA.

There are also hurdles beyond procedural ones. The federal contractor community will again put up resistance on several fronts. Some contractors are attempting to persuade lawmakers to extend the implementation period beyond three years. Additionally, some could attempt to have Congress carve out loopholes for existing Chinese chips and retain the flexibility to use Chinese semiconductors in their businesses. Such dramatic changes would undercut the impact of the proposed policy. The existing chips are the risk; in reality, U.S. weapons are generally manufactured with these larger chips, not the smaller, cutting-edge chips produced by Taiwan Semiconductor Manufacturing Company.

There is no credible national security case for keeping the door open to Chinese semiconductors in federal procurement networks. This is especially true given the nature of the entities being targeted. SMIC is a Defense Department-designated Chinese military company. YMTC, the Chinese government’s “national champion” memory-chip producer, has ties to China’s military-civil fusion strategy and has reportedly helped Huawei evade export-control restrictions.

Beyond this rap sheet, the reality is that the entire semiconductor ecosystem in a Chinese Communist Party-led China threatens U.S. national and economic security interests.

Ensuring that the federal government’s systems and the supporting systems of its trusted suppliers are not corrupted with high-risk Chinese semiconductors is a bare minimum measure to protect U.S. national-security interests.

[Photo by Air Force Tech. Sgt. Ned T. Johnston]

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