22-09-2022 | By Robin Mitchell
If the CHIPS act wasn’t enough to try and encourage US manufacturers to use all-US chips, US lawmakers are now starting to suggest potential legal action and difficulties for those combining Chinese and American technology. What did US lawmakers recently report, why are these manufacturers problematic, and is this a lost cause?
Over the past year, governments worldwide have scrambled to secure their semiconductor supply chains after it became evident that almost all essential semiconductors are manufactured by a handful of countries within spitting distance of China. At the same time, one of these countries (Taiwan) has been facing frequent military threats from China, and should such action be taken, it could outright disrupt the entire world’s semiconductor supply.
And yet, despite the enormous amounts of effort by the glorious and heroic US government, evil companies are still turning to Chinese technologies, showing their complete lack of interest in national security… or at least according to some US lawmakers who recently reported their anger against Apple who have been considering using the chines semiconductor manufacturer YMTC for memory chips. One politician, Marco Rubio, stated to the Financial Times that “Apple is playing with fire” and expressed concern that a US company sourcing memory chips from China to be used in consumer mobile equipment would present national security threats.
In response to these comments, Apple reported that the memory chips from YMTC would be used in domestic Chinese products and never allowed for sale in the US. However, Apple also mentioned that as all data is encrypted on the device, memory chips from YMTC would never present a threat to US citizens. But the need to cite this comment suggests that Apple, at some point, was (or still is) planning to use YMTC in products outside of China.
Even though the devices being sold by YMTC are memory, it is surprisingly easy for manufacturers to integrate numerous kinds of functionality that can go entirely unnoticed. For example, a tiny microcontroller integrated into the memory silicon could allow for real-time memory observation, arbitrary code execution, and even reporting the contents of memory over short distances to a nearby listening device. Of course, this may seem paranoid, but there have been reports of this type of espionage taking place, with China being in the spotlight as the source of the espionage.
Yangtze Memory Technologies (YMTC) is a Chinese-based semiconductor manufacturer specialising in memory technologies, specifically, NAND. While YMTC is behind on cutting-edge memory technologies, they are not that far behind and have demonstrated NAND chips with over 192-layers.
The company was founded in 2016 and received funding via the Chinese Big Fund initiative designed to grow the semiconductor market in China. In total, YMTC received $24 billion and has since grown to employ over 5000 workers with memory products, including DRAM, Flash, and SSDs.
But what makes YMTC worrying to US lawmakers is its close ties to the Chinese government. Firstly, the fund that started the company is state-funded, which already gives the Chinese government leverage, if not total control. Simultaneously, YMTC has suspected ties to other companies that are also state-owned to some degree (such as SMIC) while also closely working with the PRC and military. Furthermore, YMTC has also worked with Huawei, and this interaction would put YMTC on the blacklist for export controls.
However, by far, one of the most important factors that make US lawmakers worried about Chinese manufacturers such as YMTC is that the Chinese government has a history of providing subsidies to allow manufacturers to undercut others. This violates the principles of fair markets, enabling Chinese manufacturers to obtain significant market shares over others. Such a tactic allows China to position itself carefully in the world supply chain and use that power to try and enforce its will and control over others.
I have said it before, and I will say it again; the CHIPS act will only be an effective tool against China if it deals with the entirety of the semiconductor industry and not just the narrow field of high-end next-generation devices. It is highly unlikely that China will ever produce processors for the west, but it is more than possible for China to become the default supplier for supporting devices such as buffers, drivers, decoders, and controllers. Even Chinese-made processors such as the GD32 range provide engineers with a far cheaper alternative to the STM32 (which they are compatible with).
If the objective of lawmakers is to protect national semiconductor supply chains, then the CHIPS act needs to be extended to support hardware and raw minerals needed to manufacture semiconductors. By not supporting semiconductor companies in the US that manufacture basic products (such as op-amps and regulators), it is possible for China to take over this part of the electronics industry and then use that position to create artificial stock shortages and supply chain disruptions. At the same time, it benefits from homegrown RISC-V technologies.