Is there a loophole in the US chip export regulations to China?

In a letter to National Security Adviser Jake Sullivan on October 6, lawmakers Michael McCaul and Mike Gallagher said the new advances by China's leading chipmaker show "loopholes" in the sweeping set of rules the US is applying. Accordingly, the lawmakers called on the government to update to fix these vulnerabilities, Reuters reported.

Two US congressmen said there was a loophole in the regulation restricting chip exports to China.

In the US House of Representatives, Mr. McCaul is Chairman of the Foreign Affairs Committee, while Mr. Gallagher serves as Chairman of the Special Committee on US-China Strategic Competition.

The letter comes after Huawei Technologies announced its Mate 60 Pro smartphone powered by advanced chips made by China's Semiconductor Manufacturing International Corporation (SMIC), despite US sanctions.

In the letter, the lawmakers urged the Biden administration to update the rules and take immediate action against Huawei and SMIC. They also called on the administration to cut off the Chinese companies’ access to artificial intelligence chips through cloud computing services.

In addition, the two lawmakers also called on the government to begin implementing its own rules, aiming to place restrictions on any Chinese company that obstructs US investigations and verification.

In a separate report this week, Reuters also said the Biden administration has warned China that it plans to update the rules. Spokespeople for the National Security Council and the Bureau of Industry and Security, the Commerce Department agency that oversees export controls, did not immediately respond to requests for comment.

Earlier, The Business Times reported that Mr. Gallagher planned to meet with the US Semiconductor Industry Association to express concerns about the country's investments in China's chip industry.

The group represents major chipmakers such as Nvidia and Intel, whose sales to China have been hit by recent changes to US export regulations. Gallagher wants to speak to the group to urge it to limit sales of semiconductor manufacturing equipment to China, the source added.

The meeting was scheduled but was later postponed due to disagreement over a schedule, sources said.

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