CaliToday (08/10/2025): A bombshell bipartisan investigation by U.S. lawmakers has revealed that critical loopholes in Western export controls have allowed Chinese chipmakers to legally purchase nearly $40 billion worth of sophisticated semiconductor manufacturing equipment, undermining a multi-year effort to curb Beijing's technological rise.
Flags of China and U.S. are displayed on a printed circuit board with semiconductor chips, in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration
The report from the U.S. House of Representatives' Select Committee on China, obtained by Reuters, argues that a lack of coordination and inconsistent regulations between the United States, Japan, and the Netherlands have created a fractured policy. This has enabled non-U.S. toolmakers to fill the void, selling advanced equipment to Chinese firms that American companies are explicitly barred from supplying.
For years, both Democratic and Republican administrations have identified China's growing semiconductor industry as a vital national security threat, essential for its military modernization and advancements in artificial intelligence. The export controls were designed to be a cornerstone of the U.S. strategy to maintain a technological edge.
However, the committee's findings paint a picture of a policy in disarray. In the last year alone, Chinese companies acquired a staggering $38 billion in equipment from the industry's five leading suppliers—Applied Materials, Lam Research, KLA, ASML, and Tokyo Electron. This represents a 66% increase from 2022, the year many of the tool export restrictions were implemented, and accounted for nearly 39% of the five companies' total sales.
"These are sales that are helping China become increasingly competitive in producing a wide range of semiconductors, with profound implications for human rights and democratic values worldwide," the report stated.
The investigation highlighted three Chinese firms—SwaySure Technology Co, Shenzhen Pengxinxu Technology Co, and SiEn (Qingdao) Integrated Circuits Co—as particular security concerns. In a previous letter to the Commerce Department, committee leaders Rep. John Moolenaar (R-MI) and Rep. Raja Krishnamoorthi (D-IL) flagged these companies for their alleged links to a clandestine network supporting sanctioned tech giant Huawei Technologies. U.S. officials ultimately banned exports to them last December.
Acknowledging the current policy's shortcomings, an industry executive welcomed the call for tighter alignment. Mark Dougherty, the U.S. president for Japanese supplier Tokyo Electron, noted that sales to China had begun to decline this year due to new regulations but conceded that the desired outcome of the controls had not yet been fully realized.
"I think from a U.S. perspective, it's clear there's still a desired outcome that's not been achieved," Dougherty told Reuters.
Applied Materials and Lam Research did not respond to requests for comment. ASML and KLA stated they could not comment until seeing the full report.
To close these critical gaps, the committee is urging the allied nations to move away from a narrow, company-specific blacklist and instead adopt a broader ban on selling chipmaking tools to China. The report also recommends extending restrictions to include components that China could use to build its own indigenous semiconductor equipment.
The findings suggest the U.S. and its allies are in a high-stakes race against a determined competitor.
"China is trying to rewrite the entire supply chain," said Craig Singleton, a senior fellow at the Foundation for Defense of Democracies. "What were once niche tool segments have now become battlegrounds."