US needs to crack down on Chinese chipmaker SMIC, Republican lawmaker says

By Karen Freifeld

(Reuters) – A top Republican lawmaker has accused the Biden administration of not doing enough to prevent China’s Semiconductor Manufacturing International Corp (SMIC) from strengthening the country’s chipmaking industry and military-industrial complex.

Michael McCaul, chair of the House Foreign Affairs Committee, urged U.S. Commerce Department agents to visit SMIC’s facilities and check whether the company is illegally producing chips for Huawei, the sanctioned telecommunications company seen as a national champion within China’s chip industry.

In a Nov. 4 letter seen by Reuters, McCaul described what he called “growing bipartisan frustration” that the Commerce Department’s Bureau of Industry and Security (BIS) had not acted on reports of Huawei’s efforts to evade U.S. export controls.

“There is growing evidence that SMIC is violating U.S. export control laws,” McCaul wrote to BIS under secretary Alan Estevez. If China is not willing to immediately agree to a “comprehensive audit of all SMIC facilities and its books,” McCaul said, “BIS should pause all existing licenses for SMIC.”

McCaul said SMIC’s breakthroughs – including its advanced chip in a Huawei smartphone, and expected production of over a million AI processors for Huawei – are a “smoking gun” for a violation and could help China surpass the U.S. in artificial intelligence.

The Commerce Department said it had received McCaul’s letter and would respond through “appropriate channels.” Last week, in response to similar criticism, it said that no Commerce Department had been tougher on China.

SMIC did not immediately respond to requests for comment, nor did Huawei.

The Chinese embassy in Washington said in a statement that “certain U.S. politicians” were “overstretching the concept of national security” and politicizing “science and technology and economic and trade issues.”

SMIC was added to the Commerce Department’s restricted trade list in 2020 for alleged ties to the Chinese military industrial complex. A year earlier, Huawei was placed on the list after alleged sanctions violations. Both companies have previously denied wrongdoing.

Being on the “Entity List,” as it’s called, usually bars U.S. shipments to targeted firms. But when the Trump administration added Huawei and SMIC, their rules allowed exporters to get licenses to ship billions of dollars in U.S. goods and technology to them.