The Biden administration is set to place chip maker Yangtze Memory Technologies on a trade blacklist, in the latest U.S. effort to target Chinese tech companies it believes threaten its security.
The US Commerce Department will put YMTC and other Chinese companies on its “entity list” as early as this week, according to three people familiar with the plan. US groups are prohibited from selling technology to companies on the list unless they have a hard-to-obtain export license.
The move comes two months after the US unveiled strict export controls that have made it harder for China to source and produce high-end semiconductors.
The Financial Times reported this year that YMTC appears to have violated US export controls by supplying Chinese telecoms equipment maker Huawei with Nand memory chips for its smartphones.
US lawmakers have been lobbying the Biden administration for months to place the company on the entity list. Lawmakers also warned Apple that it would face severe scrutiny if it goes ahead with its plan to buy YMTC chips.
When the US introduced export controls on Oct. 7, it also placed more than 30 Chinese companies, including YMTC, on the “unverified list” of entities for which the US has failed to carry out end-user checks to ensure that the technology americana is not being diverted for unauthorized uses. At the time, it set a 60-day window for companies to allow the US to conduct investigations or face 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 relented and was allowing inspections of some companies after a long period of no cooperation. He said the US is “watching better behavior” from China’s Ministry of Commerce, which oversees end-use checks 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 the 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 is modernizing the Chinese Communist Party’s military and [the commerce department’s bureau of industry and security] needs to aggressively move forward with more listings – and bring our partners and allies on board.”
The YMTC move is likely to provoke an outcry from Beijing, which this week filed a dispute with the World Trade Organization over Oct. 7 export controls. The White House has described the YMTC as a “national champion”.
In addition to concerns that YMTC has violated US law, the Biden administration is also concerned that the company will sell memory chips below cost and put pressure on US rivals such as Micron, as well as companies in allied countries.
In October, the FT reported that YMTC had been stockpiling foreign chip-making equipment for months, anticipating that the Biden administration was preparing to take steps that would hurt the company.
The US Commerce Department and YMTC declined to comment.
The move marks another 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, modeling for nuclear weapons and developing hypersonic weapons. China has also been taking steps to boost its indigenous technological capabilities as it comes under increasing pressure from the US and its allies.
The US is currently negotiating a trilateral agreement with Japan and the Netherlands to prevent Japanese and Dutch chip-making tooling companies from selling advanced equipment to China. The US hopes the deal will supplement a similar ban on US toolmakers that was part of the Oct. 7 export controls.
The action against YMTC and other companies also follows the first personal meeting as leaders between President Joe Biden and 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 beat around the bush in areas related to national security.
In an unrelated move targeting 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.
Human rights activists have raised concerns about the group, one of several Chinese surveillance camera makers accused of using facial recognition technology to help Beijing target Uighurs, an ethnic minority in 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 most people have never heard of.” He said the US government had the tools to drive the company out of business and it just needed the political will to act.
The company has sold surveillance equipment to Iran’s security, police and military services, Singleton noted, which has sparked concern among US lawmakers such as Senator Marco Rubio.
It is unclear whether the Commerce Department will place Tiandy on the Entity List or take other steps. The department declined to comment.
The National Security Council said: “We do not envisage sanctions. We will continue to hold individuals and entities accountable for supporting human rights violations by the People’s Republic of China and Iran.”
In May, the Financial Times reported that the government was moving to impose tough sanctions on Hikvision, China’s biggest maker of surveillance cameras. The White House is struggling to figure out what to do, as Hikvision sells cameras to more than 180 countries, including the US and UK.
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Additional reporting by Qianer Liu in Hong Kong