Over the last five years, the Chinese government has taken aggressive measures to build the country’s indigenous semiconductor design and production capabilities. These efforts are not siloed. This is part of national strategy to achieve what the U.S. Department of Defense’s 2020 China Military Power Report identifies as “the great rejuvenation of the Chinese nation.” The drive to develop its chip-making capabilities is intended not only to advance its technology sector, but also to expand its military capabilities. This reality is enshrined in the government’s “Military-Civil Fusion” strategy, as well as national laws that require Chinese civilians and businesses to support the government’s intelligence operations.
A recent report by James Mulvenon, Director of Intelligence Integration at SOS International and potential front-runner to lead the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), details ties between Yangtze Memory Technologies Company (YMTC) and the People’s Liberation Army (PLA). YMTC is China’s leading maker of NAND memory chips. YMTC’s parent company, Tsinghua Holdings, oversees a large network of subsidiaries, including tech manufacturers that supply the PLA. “These military ties have led previous acquisition bids for American companies by Tsinghua Unigroup, YMTC’s direct parent, to be correctly blocked for national security concerns,” the report notes.
Tsinghua Tongfang, another subsidiary of Tsinghua Holdings, provides military-end use products to the PLA, including wireless communications, satellite navigation and electronic countermeasure equipment, among other goods. The company has a Military Information Security Product certification, which is required for companies that support the PLA. These sales generate over $9 million USD annually. Leaders within Tsinghua Tongfang also have personal military ties, Mulvenon notes. Zhao Xiaoyan, general manager of Tongfang Time Link, is a former member of the PLA and a graduate of the PLA Information Engineering University, the training academy for Chinese military’s technical intelligence organization. Yang Zhiming, manager of the military business arm, was a former leader at two Chinese military factories.
Tsinghua Holdings is funded and controlled by Tsinghua University. The University’s research portfolio targets defense and military capabilities. At least one laboratory at Tsinghua University has been approved by the state as a key national defense discipline lab with other labs dedicated to advanced military technology development.
Last year, Mr. Mulvenon published a report that revealed Semiconductor Manufacturing International Corporation’s (SMIC) connections to the Chinese military. The findings informed the U.S. Department of Commerce’s decision to add SMIC to the U.S. Entity List, a blacklist that effectively precludes American companies from selling goods to those named.
Dominance in the semiconductor market is a key objective of the Chinese Communist Party’s “Made in China 2025” plan, which seeks to satisfy 70 percent of the country’s demand for chips domestically within the next five years. To achieve that goal, the Chinese government has used state-owned companies to pilfer sensitive U.S.-made “dual-use” technologies, which have both civilian and military applications.
The Washington Post reported last month that China’s acquisition of U.S.-born civilian technologies has supported the PLA’s development of advanced weapons, including a hypersonic missile that may evade U.S. defense systems. American manufacturers that sell dual-use technologies to Chinese state-owned companies may be complicit in supporting this proliferation because, as the Post notes, “computer chips that could be used for a commercial data center can power a military supercomputer.”
The Trump Administration began implementing tougher export restrictions on dual-use technology, adding some 330 Chinese government owned or affiliated actors to the Entity List. The Biden Administration added seven more state-sponsored companies to the list. Even so, thousands of similar Chinese government-aligned entities continue to access advanced US technology, including YMTC, a fact that seems to defy the Export Control Reform Act of 2018 which was intended to stop the flow of sensitive and emerging technologies to the Chinese military. For example, U.S. semiconductor manufacturing equipment (SME) companies like KLA, Lam, and Applied sell to YMTC.
The United States supplies about 80 percent of the world’s SME with a handful of other nations rounding out the remainder. This represents an important point of leverage to slow the growth of China’s military and to create cooperation with like-minded nations to ensure that critical technologies are not licensed for risky uses and users. Washington policymakers have had this information for some time, including the intelligence about YMTC. The question is whether and when they will act on it.
*This article was originally published in Forbes