China gains access to American microchips. Courtesy | Pixabay

A new report found that American semiconductor chips are fueling China’s nuclear war machine.

For decades, American semiconductor chips flowed freely into China’s top nuclear weapons institute by dodging United States export regulations meant to halt such purchases, according to a new report from the Wall Street Journal. 

The report found that in the past two years the state-run China Academy of Engineering and Physics, which the U.S. restricted access to advanced U.S. technology since 1997, purchased highly-advanced semiconductor chips more than a dozen times. Many of these chips were acquired through resellers in China. 

The chips, which were primarily used for data and algorithmic analysis, were used in personal computers and data centers, the Wall Street Journal reported. Many of the chips were bought by the academy’s laboratory studying computational fluid dynamics, a field that includes the modeling of nuclear explosions. 

Jordan Scott, a Hillsdale College senior studying history, said China has benefited from its close economic ties to the United States. 

“It’s no secret China has used U.S. technology for its own development for a long time, but semiconductor and computer chip theft or reselling seems like a particular problem,” Scott said. “Chips and superconductors are the hardware that enables technology like nuclear weapons, supercomputers, or even spy satellites to function.” 

Scott said it’s not surprising that China is using industrial espionage and American semiconductors to power its military modernization. 

“China has made it clear they don’t have scruples about stealing such technology, which often seems to take the form of espionage, especially at leading U.S. research universities or companies,” Scott said. “It seems even existing legal restrictions are easy to get around in the secondhand or resale market. However, I don’t find that surprising given the extent of China and U.S. economic ties.”

The latest debacle underlines the challenge U.S. regulators face when attempting to combat the Chinese Communist Party’s policy of military-civilian fusion, which ​​eliminates the barriers between its civilian and commercial research and its military and defense sectors, according to the U.S. Department of State. This policy underscores Beijing’s ambition to make the People’s Liberation Army the most technologically advanced military in the world.

Associate Professor of Economics Charles Steele said it is extremely difficult to enforce these types of export controls given the globalized nature of the international economy. 

“When I buy a car from Honda, the design and transmission might be from Japan, but its parts come from all around the world, and then it’s finally assembled in Tennessee,” Steele explained. “All this to say, it’s extremely difficult to disentangle the global economy.” 

Steele said America’s existing export control regime focuses on a principle of trying to penalize violators. 

“The way that sanctions are supposed to work is that if you violate them, then you are subject to retaliation in trade policy,” Steele said. 

Export controls are the most common form of retaliation according to the State Department. The Department of Commerce maintains a list of governments, corporations, and individuals restricted from acquiring items that could be used for nuclear, biological, or military purposes. Individuals on the list must apply for a license in order to purchase these items. 

In 2019, the United States began taking a tougher stance against Chinese acquisition of dual civilian and military uses of technology after sanctioning the telecommunications giant Huawei, the news outlet Reuters reported. These sanctions blocked Huawei from getting its hands on certain types of chips it needed to expand its 5-G wireless systems. It also prohibited U.S. companies from exporting their chips or components made with U.S. intellectual property to Huawei. 

Nevertheless, in 2020, the Commerce Department was still granting millions of dollars in licenses to Huawei in its attempt to acquire chips for its auto-component business, according to a Reuters report. A Center for Security and Emerging Technology study found that in 24 procurement contracts used by Chinese military and defense contractors for artificial intelligence related-systems, all chip components were designed by U.S. companies. 

In 2021, Phytium Technology, a Chinese company, used American software to assist the People’s Liberation Army in developing its hypersonic missile technology, the Washington Post reported. 

As the Chinese military often hides behind civilian and commercial procurement contracts, it is difficult for the Commerce Department’s enforcement agency, the Bureau of Industry and Security, to provide adequate enforcement without additional funding, a Center for Strategic International Studies report found. 

As China finds more ways around U.S. export controls, new regulatory changes have helped make enforcement easier.

On Oct. 7 of last year, the Commerce Department announced a slate of new restrictions on the Chinese acquisition of American semiconductor chips, according to Reuters. These restrictions essentially cut China off from the export of tools, know-how, and specific supporting technologies relating to semiconductor chips. 

During a speech around the same time, National Security Adviser Jake Sullivan called the new restrictions a “small yard, high fence” in which the United States will gatekeep critical technologies from falling into the hands of geopolitical competitors like China or Russia. 

“Chokepoints for foundational technologies have to be inside that yard, and the fence has to be high—because our strategic competitors should not be able to exploit American and allied technologies to undermine American and allied security,” Sullivan said. 

Steele said using export controls to protect intellectual property rights and national security can be necessary when they are threatened.

“So if you are sacrificing defense for economic gain, you have to ask yourself which one is more important in any particular instance,” Steele said. “You have to realize that if you make that exception, it’s a cost.”