China's Chip Advancement Doesn't Necessarily Signal US Export Control Failure, Former Official Says

China’s announcement this summer that it made progress in its chip technology doesn't necessarily mean there was a failure in U.S. export control policy, said Bill Reinsch, a senior export administration official during the Bill Clinton administration. Reinsch said it’s unclear if China’s new chip even exists and where Beijing received the equipment to produce it.

China’s Semiconductor Manufacturing International Corporation recently announced that it’s now able to produce 7 nanometer chips, an important step forward for SMIC’s advanced semiconductor manufacturing capability (see 2208110027). But Reinsch, speaking last week on the Center for Strategic and International Studies’ Trade Guys podcast, said more information is needed before assigning blame.

“We don't know enough. There's questions about whether the chip actually exists,” said Reinsch, a senior adviser at Kelley, Drye & Warren and a CSIS expert. Some reports say the chip is “essentially a copy of a limited version” of a chip from Taiwan Semiconductor Manufacturing Company, Reinsch said, while others believe the chip isn’t scalable and that SMIC only has a limited quantity.

He also said it’s not yet publicly known what equipment was used to produce the chip. “I think until we get the answers to those questions, it's hard to explain exactly what happened,” Reinsch said. “And it's certainly hard to say that it represents a U.S. failure.”

Reinsch also said the U.S. doesn’t produce chips domestically at the 7 nanometer level. The global leader in producing 7 nanometer chips and below is TSMC, he said, and the Netherland’s ASML produces the equipment to make chips at that level. “So if the Chinese are actually able to do this, which we will ultimately find out, then you could say that this was a failure somewhere,” Reinsch said. “It's not clear that it's a U.S. failure.”

SMIC’s announcement comes as the Bureau of Industry and Security undergoes a review of its export controls over the most sensitive semiconductors and chipmaking equipment that can be exported to China (see 2207150023 and 2208010011). SMIC, China’s top chipmaker, is currently subject to a license reviewpolicy of presumption of denial for items used to produce semiconductors at advanced technology nodes of 10 nanometers or below.

Reinsch said BIS is looking to increase controls on sensitive technology exports to China. “It’s clear that the Biden administration is tightening up this process,” he said. “I've had conversations with senior officials that affirm that they're expanding the scope of controls.”

Reinsch also said a recent report by The Wall Street Journal on export controls was “alarmist.” The report pointed to data that showed the U.S. approved 94% of license applications for technology exports to China in 2020 (see 2208180038).

“You need a license for anything that you want to export to Huawei,” Reinsch said. “So yes, we're exporting a lot of low-end items to Huawei, and they all get license approvals, because they’re stuff that doesn't matter from a strategic standpoint.” But is the U.S. “exporting the stuff that does matter from a strategic standpoint?” Reinsch said. “I think the answer to that is no.”

Reinsch also pointed to the fact that the data was from 2020, which took place during the Trump administration. “I think most observers will say the Biden administration has been pursuing a tougher line toward China,” he said. “There's been more denials, and there's been a broader reach in terms of additional items being put under control, and additional items therefore requiring licenses.”