Today, following a months-long investigation, Select Committee on China Chairman John Moolenaar (R-MI) and Ranking Member Raja Krishnamoorthi (D-IL) uncovered alarming new information revealing that companies in America and allied nations —including ASML in the Netherlands, Tokyo Electron (TEL) in Japan, and Applied Materials, KLA, and Lam Research in the United States—fueled semiconductor manufacturing in China and made sizeable returns selling equipment to Chinese state-owned and military-linked companies.
“The Select Committee has revealed that companies in this investigation are large-scale producers of equipment that China is using to fuel its military ambitions. They are growing their profits at the expense of U.S. national security. We must not allow this critical equipment to be handed over to our foremost adversary, or America could lose the technology arms race,” said Chairman Moolenaar.
“It makes little sense to sell the CCP the chips they need to modernize their military and violate human rights. But it makes even less sense to sell them the machines and tools they need to produce those chips themselves. This bipartisan investigation reveals that the scale of these sales by Dutch, Japanese, and American firms is even more vast than we realized. Alongside our allies, we need to protect our national security and ensure we remain the world’s leading innovators in SME,” said Ranking Member Krishnamoorthi.
The numbers are staggering: in 2024, TEL received 44% of its revenue from China, Lam Research received 42%, KLA received 41%, and ASML and Applied Materials received 36%.
Additionally, SME companies are selling to entities known for their connections to the PRC’s military and intelligence apparatus. The investigation reveals that five companies identified by the U.S. government as posing serious national security concerns are top customers of the SME makers, including associates of Huawei.
The SME makers are also fueling China’s state-owned enterprises (SOEs). In 2022, the companies sold $9.5 billion worth of SME to PRC SOEs, representing 11% of their overall revenue and 42% of their PRC-based revenue. By 2024, this had grown to $26.2 billion, 27% of overall revenue, and 69% of PRC-based revenue.
Other key findings of the investigation include that Dutch and Japanese firms have increased their revenues from PRC entities as the U.S. imposed controls, and that the CCP appears to stockpiling lithography equipment at sophistication levels just below where current restrictions apply.
In their initial letters to the companies, Moolenaar and Krishnamoorthi warned of boosting the PRC’s semiconductor industry, writing, “[t]he PRC is now the largest market for semiconductor manufacturing equipment, and it is stockpiling semiconductor manufacturing equipment to bolster its national self-sufficiency in a long-term competition with the United States.”
PRC semiconductor development poses threats to U.S. national security, including:
- Military: Chips for PLA weapons systems that could be used to kill American and allied servicemembers, especially those used by China’s “intelligentized” warfare which leverages AI and high-performance computing.
- Trade: China looks to build a domestic, vertically integrated chip manufacturing industry—one day rendering its economy resistant to export restrictions by the U.S. and allies.
- Economic Security: China will gain an economically dominant chip manufacturing position in both legacy and leading-edge chips, giving them leverage against America’s national security interests.
- Human Rights: As documented in previous Select Committee investigations, the CCP uses both AI and high-performance computing to violate human rights domestically and promote its digital authoritarianism around the world.
“The ability to design and produce semiconductors lies at the heart of the technology competition with China, and SME represents a crucial chokepoint that the U.S. and our allies currently have over China. As the U.S. government works with our allies and partners and plots the course ahead on export-control policy and related actions, this crucial chokepoint must be preserved, not squandered,” the investigation writes. It further notes that “[t]he U.S. and allies only have the ability to export-control SME because we collectively are the world’s leading innovators in SME. We must double down on our success.”
In order to combat U.S. and allied companies profiting from America’s top adversary, the investigation includes several recommendations, including:
- Aligning allied, such as Dutch and Japanese, exports controls with U.S. restrictions, so the Netherlands and Japan catch up to American controls and enforcement.
- Expanding country-wide controls for the PRC to make diversion more difficult.
- Widening the list of restricted entities and prohibiting all allied manufacturers from selling to additional Chinese military entities.
- Restricting the export of components that are important to the production of SME.
- Creating a new whistleblower export control program.
- Increasing resources and personnel for BIS and the State Department to improve enforcement and diplomacy.
- Ensuring U.S. and allied innovation and leadership in SME, including by improving government-industry communication and helping U.S. SME firms train and attract top global talent.
As Chairman Moolenaar and Ranking Member Krishnamoorthi write in the investigation, “It is far past time that the Toolmakers start treating the CCP and its national champions as threats to their corporate longevity, rather than as valued customers.”
Read the full report here.
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