A recent investigation by the House Select Committee on the Chinese Communist Party (CCP) has found that companies from the United States and allied countries have played a significant role in supporting China's semiconductor industry. The report, led by Chairman John Moolenaar (R-MI) and Ranking Member Raja Krishnamoorthi (D-IL), highlights how firms such as ASML (Netherlands), Tokyo Electron (Japan), and U.S.-based Applied Materials, KLA, and Lam Research have sold equipment to Chinese state-owned and military-linked companies, generating substantial profits.
"The Select Committee has revealed that companies in this investigation are large-scale producers of equipment that China is using to fuel its military ambitions. They are growing their profits at the expense of U.S. national security. We must not allow this critical equipment to be handed over to our foremost adversary, or America could lose the technology arms race," said Chairman Moolenaar.
“It makes little sense to sell the CCP the chips they need to modernize their military and violate human rights. But it makes even less sense to sell them the machines and tools they need to produce those chips themselves. This bipartisan investigation reveals that the scale of these sales by Dutch, Japanese, and American firms is even more vast than we realized. Alongside our allies, we need to protect our national security and ensure we remain the world’s leading innovators in SME," said Ranking Member Krishnamoorthi.
According to the committee's findings, in 2024, Tokyo Electron received 44% of its revenue from China, Lam Research 42%, KLA 41%, and both ASML and Applied Materials 36%. The report also states that these companies have sold to entities with known ties to China's military and intelligence sectors, including those identified by the U.S. government as national security risks.
Sales to Chinese state-owned enterprises have also increased significantly. In 2022, $9.5 billion worth of semiconductor manufacturing equipment (SME) was sold to these entities, making up 11% of overall revenue for the companies involved and 42% of their China-based revenue. By 2024, these figures rose to $26.2 billion, representing 27% of overall revenue and 69% of China-based revenue.
The investigation found that Dutch and Japanese firms increased their sales to Chinese customers as U.S. export controls tightened. It also noted that China is stockpiling lithography equipment just below current restriction levels.
In earlier correspondence with these companies, Moolenaar and Krishnamoorthi wrote: “The PRC is now the largest market for semiconductor manufacturing equipment, and it is stockpiling semiconductor manufacturing equipment to bolster its national self-sufficiency in a long-term competition with the United States.”
The committee's report outlines several risks associated with China's advances in semiconductor technology. These include potential uses in military systems by the People's Liberation Army (PLA), efforts by China to build a self-sufficient chip industry that could resist export restrictions, economic leverage over global chip supply chains, and concerns about human rights abuses facilitated by advanced computing technologies.
"The ability to design and produce semiconductors lies at the heart of the technology competition with China, and SME represents a crucial chokepoint that the U.S. and our allies currently have over China. As the U.S. government works with our allies and partners and plots the course ahead on export-control policy and related actions, this crucial chokepoint must be preserved, not squandered," states the report. It adds: “[t]he U.S. and allies only have the ability to export-control SME because we collectively are the world’s leading innovators in SME. We must double down on our success.”
To address these issues, recommendations include aligning export controls among allied countries with those of the United States, expanding controls on exports to China, increasing restrictions on sales to additional Chinese military entities, restricting key component exports, creating a whistleblower program for export controls, boosting resources for enforcement agencies, and supporting innovation in SME through improved communication and talent development.
As stated in the report: “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.”
The full report can be accessed online.
