Two senators from opposite sides of the aisle have asked the Commerce Department to tighten export-control guidance to prevent a potential route for advanced chip technology to reach Chinese companies through their foreign subsidiaries.
The lawmakers, Sen. Jim Banks (R-Ind.) and Sen. Andy Kim (D-N.J.), wrote on Monday to Jeffrey Kessler, the head of the Bureau of Industry and Security (BIS), urging the agency to address explicitly the scenario in which subsidiaries or affiliates of Chinese firms place orders for custom chips with contract manufacturers such as Taiwan Semiconductor Manufacturing Co.
The request follows a separate administration action last week that moved to block what officials saw as a possible loophole that might have allowed advanced processors - including those produced by Nvidia - to be exported to units of Chinese companies located outside mainland China. That possible gap stems in part from last year’s announcement that the administration would not enforce rules that had been put in place by the previous administration governing global access to U.S. chips.
BIS has since clarified that shipments of chips to subsidiaries of Chinese companies in third countries - examples cited include jurisdictions such as Malaysia - require a license. But some experts have said the clarification does not go far enough to close every avenue by which advanced U.S.-origin technology could be diverted.
Chris McGuire, a former State Department official referenced in recent commentary, warned that guidance still left unresolved the risk that front companies tied to Chinese firms could request bespoke chips be fabricated by contract foundries. That concern underlies the senators’ letter to Kessler.
"Should this gap remain unaddressed, it would substantially undermine every other restriction the United States has imposed on the (China’s) access to advanced computing capability," the senators wrote. "Export controls that can be circumvented through fabrication orders placed at the world’s most advanced foundry offer no meaningful protection to American national security or to the competitiveness of United States industry."
The senators singled out the need for BIS to tackle directly the question of subsidiaries of Chinese firms ordering custom chips from contract manufacturers. They warned that if the agency does not close the gap, existing restrictions could be effectively circumvented.
Requests for comment by BIS and by Taiwan Semiconductor Manufacturing Co. were not immediately answered.