China chip firm powered by US tech and money avoids Biden’s crackdown

FE Team | Published: December 15, 2023 00:29:55

WASHINGTON, Dec 14 (Reuters): A Chinese chip designer, part-owned by the country's top sanctioned chipmaker, is purchasing US software and has American financial backing, relationships that underscore the difficulty Washington faces applying new rules meant to block American support for Beijing's semiconductor industry.
The company, Brite Semiconductor, offers chip design services to at least six Chinese military suppliers, a Reuters examination of company statements, regulatory filings, tenders and academic articles by People's Liberation Army (PLA) researchers and institutions found.
Its second largest shareholder and top supplier, chipmaker SMIC, was placed on the so-called US entity list over alleged ties to Beijing's military, effectively barring it from receiving some goods from US suppliers.
Despite those relationships, Brite boasts funding from a US venture capital firm backed by Wells Fargo and a Christian university, and has continued access to sensitive US technology from two California-based software companies, Synopsys and Cadence Design, documents showed. Reuters has found no evidence that Brite's relationships with US firms violate any regulations.
The Biden administration, with bipartisan support, has taken pains to stop the flow of technology and investment to Bejing's chip sector, unveiling rules last October to halt some US exports of chips and chipmaking tools to China and in August announcing a ban on certain new US investments in the industry. It has also added dozens of Chinese companies to the entity list, many over ties to China's military.
Brite did not respond to requests for comment. The Commerce Department and the White House declined to comment. The Chinese Embassy in Washington did not comment on Brite but accused the United States of "blatant?economic coercion and?bullying in the field of technology."
Although not an apparent breach of any US rules, Brite's access demonstrates the challenges facing Washington's bid to keep US equipment and money from being used to advance China's military ambitions, and suggests the US will struggle to succeed unless it targets many more companies that have slipped under its radar.
Republican Senator Marco Rubio, an influential China hawk and member of the foreign relations committee, characterized Reuters' findings on Brite as "concerning."
"Companies connected to China's military supply chain should not have access to American technology and investment. The Biden Administration's haphazard approach to export controls and investment restrictions clearly is not working," he said.
Others said Brite illustrates Beijing's ability to use low-profile companies to skirt American export bans on big-name Chinese firms.
"Brite is a classic example of how a US-China joint venture could end up funneling valuable semiconductor technology to SMIC and the PLA," said Martijn Rasser, managing director of Datenna, an open-source intelligence company.
China's defence ministry and SMIC did not respond to questions about their relationships with Brite.
A bar chart showing the shareholders of Chinese firm Brite with California-based Norwest highlighted in red. A sanky diagram showing suppliers of Brite and a list of select customers at the bottom with ties to Chinese military.
Semiconductor Manufacturing International Corporation (SMIC), which holds a 19 per cent stake in Brite, has long been in Washington's crosshairs. The Trump administration added it to a list of "military end users" in November, 2020.
Next, SMIC was added to the "entity list" over its apparent ties to the Chinese military industrial complex. SMIC has previously denied any ties to China's military, saying that it manufactures chips and provides services "solely for civilian and commercial end-users and end-uses."