The US wants to ban government deals with chip makers in China

• Two US senators have lobbied hard for the American government’s business ban on Chinese chip makers.
• They pushed an amendment blocking federal access to semiconductor products and services made by Chinese companies to make it into the final version of this year’s National Defense Authorization Act.

In the United States (US), only one bill in Congress makes it into law each year: the National Defense Authorization Act (NDAA). Because the bill is reliably passed every year, legislators year after year try to add whatever issue they are passionate about to the bill in hopes of it becoming law. The NDAA in the US is a frequent instrument for China-related provisions with strong bipartisan support.

That said, in the ongoing US-China conflict centered around the latter’s semiconductorstwo US senators have lobbied hard for a government business ban on Chinese chipmakers, a Thursday report through Politico show, citing three people familiar with the matter. Exactly, the majority of Leader Chuck Schumer and Sen. John Cornyn has proposed an amendment that would block federal access to semiconductor products and services made by Chinese companies.

Since they added their Senate NDAA proposal last month to the October managers’ package, they are currently working to get into the final version of the NDAA this year. “The proposal will expand the provisions to Section 889 which prohibits government agencies from doing business with Chinese telecommunications companies or contractors that use their technologies,” Politico report shows.

What does Section 889 of the NDAA mean for US-China relations?

First passed in the 2019 NDAA, Section 889’s primary target Chinese conglomerates like Huawei or ZTE. Now, the Schumer-Cornyn proposal would expand the targeted list to include Chinese chip players Semiconductor Manufacturing International Corp, Yangtze Memory Technologies Corp. and ChangXin Memory Technologies.

Apparently, the Senate and House are currently arguing over the final version of the must-pass defense bill. In essence, which amendments pass could determine the course and cause a fight between lawmakers who respectively want to feature their priorities in the behemoth legislation. Politico’s The report also indicated that it is still unclear whether Schumer and Cornyn will succeed in their effort, but it is worth noting that there is bipartisan support for curbing any federal government business with Chinese companies.

Helping the case is that Schumer is the chamber’s highest-ranking official. All said and done, the fiscal 2023 NDAA must pass the Senate and House of Representatives later this year before it can be sent to the White House for President Joe Biden to sign into law. Of the aforementioned Chinese chipmakers, YMTC in particular has come under increased scrutiny for violating export controls by continuing to supply chips to Huawei and intending to do business with Apple.

This is Schumer and Cornynincluding Senators from both parties, who opposed the company’s moves. Apple even dropped its plan to use YMTC chips in October under immense bipartisan political pressure. The US even added YMTC to the “unverified list” — which features companies the US can’t trust to check to make sure they’re complying with export rules.

Apparently, the China origin chip company is at risk of being put on the Entities List in December, essentially banning YMTC from trading in the US. The news on the NDAA amendments by Schumer and Cornyn came just a month after the Biden administration was announced a wide range of export controlsincluding a proposal to cut off China from certain semiconductor chips made anywhere in the world using US tools.

In response to the US move, officials from the People’s Republic of China (PRC) said. claimed which is more difficult decoupling could cost US semiconductor companies 18% of their global market share, 37% of their revenue, and up to 40,000 jobs. In 2021, Chinese state media stars, Intel’s revenue was $74.7 billion, of which 30 percent came from China. The PRC further argues that the subsidies from the CHIPS Act are insufficient to attract companies from Chinese markets.