US to add Chinese chipmaker to trade blacklist

The Biden administration is set to put chipmaker Yangtze Memory Technologies on a trade blacklist, part of the latest US efforts to target Chinese tech companies it says threaten its security.

The US Commerce Department will place YMTC and other Chinese companies on its “entity list” starting this week, according to three people familiar with the plan. US groups are not allowed to sell technology to companies on the list unless they have a hard-to-obtain export license.

The move comes two months after the United States unveiled tough export controls that have made it harder for China to acquire and produce advanced semiconductors.

The Financial Times reported this year that YMTC appeared to have violated US export controls by supplying Chinese telecommunications equipment maker Huawei with Nand memory chips for its smartphones.

U.S. lawmakers have been lobbying the Biden administration for months to put the company on the Entity List. Lawmakers had also warned Apple that it would face scrutiny if it went ahead with a plan to buy YMTC chips.

When the United States introduced export controls on October 7, it also placed more than 30 Chinese companies, including YMTC, on the “unverified list” of entities for which the United States has not been able to conduct end-user audits to ensure that US technology is not being misused for unauthorized purposes. At the time, he set a 60-day window for companies to allow the United States to conduct investigations or deal with the threat of being on the entity list.

Alan Estevez, the Commerce Department’s top official for export controls, said last week that China had caved in and was allowing inspections of some companies after a long period of non-cooperation. He said the United States “sees better behavior” from China’s Ministry of Commerce, which oversees end-use controls for Chinese companies. But the US Commerce Department at the time declined to say how many companies were cooperating.

Michael McCaul, a Republican lawmaker who is expected to chair the House Foreign Affairs Committee starting in January, said he has been lobbying the Commerce Department for a year to put YMTC on the Entity List.

“There is no doubt that it should be on the list of entities with the strictest licensing policy possible,” he said. “But YMTC is one of many companies that are modernizing the Chinese Communist Party’s military, and [the commerce department’s bureau of industry and security] must move forward aggressively with more registrations – and engage our partners and allies.

The YMTC’s decision is likely to spark protests from Beijing, which this week filed a dispute with the World Trade Organization over Oct. 7 export controls. The White House called the YMTC a “national champion.”

In addition to fears that YMTC has violated US law, the Biden administration is also concerned that the company is selling memory chips below cost and pressuring US rivals such as Micron as well as technology companies. allied countries.

In October, the FT reported that YMTC had stockpiled foreign chipmaking equipment for months in anticipation as the Biden administration prepared to take action that would harm the company.

The US Department of Commerce and YMTC had no comment.

This action marks a further escalation in the US-China tech war. Washington is trying to make it harder for China to develop technologies with military applications such as artificial intelligence, nuclear weapons modeling and hypersonic weapons development. China has also taken steps to bolster its local technological capabilities as it comes under increasing pressure from the United States and its allies.

The United States is currently negotiating with Japan and the Netherlands for a trilateral agreement to prevent Japanese and Dutch chip-making tool companies from selling advanced equipment to China. The United States hopes the deal will complement a similar ban on U.S. toolmakers that was part of Oct. 7 export controls.

The ruling against YMTC and other companies also comes on the heels of President Joe Biden’s first in-person meeting as leaders with President Xi Jinping at the G20 summit in Bali, Indonesia last month.

The two countries are trying to find ways to prevent their relationship from deteriorating further, but the Biden administration has stressed that it will not throw punches in areas related to national security.

In a move unrelated to another Chinese tech company, the US Commerce Department is also targeting Tiandy Technologies, a Chinese maker of surveillance cameras, according to two people familiar with discussions within the Biden administration.

Rights activists have raised concerns about the group, one of several Chinese surveillance camera makers accused of using facial recognition technology to help Beijing persecute Uyghurs, the ethnic minority from the Xinjiang region.

Craig Singleton, a China expert at the Foundation for Defense of Democracies, recently wrote a report on Tiandy that described it as “the most dangerous Chinese company that most people have never heard of.” He said the US government had the tools to bankrupt the company and just needed the political will to act.

The company has sold surveillance equipment to Iranian security services, police and the military, Singleton noted, raising concern from US lawmakers such as Senator Marco Rubio.

It’s unclear whether the Commerce Department will put Tiandy on the entity list or take other action. The department declined to comment.

The National Security Council said, “We are not planning any sanctions. We will continue to hold individuals and entities accountable for their support of human rights abuses by the People’s Republic of China and Iran.

In May, the FT reported that the administration was preparing to impose stiff sanctions on Hikvision, China’s largest surveillance camera maker. The White House is wondering how to act given that Hikvision sells cameras in over 180 countries, including the US and UK.

Follow Demetri Sebastopulo on Twitter

Additional reporting by Qianer Liu in Hong Kong

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