Schumer, Cornyn, Wicker Announce Inclusion Of Amendment To Limit Federal Use Of Chinese-Made Semiconductor Chips In Must-Pass Defense Bill; Legislation Will Strengthen National Security, Boost U.S. Chip Industry, And Create Domestic Manufacturing Jobs By Eliminating Dangerous Chinese Chips From U.S. Government Supply Chains

Schumer-Cornyn Led Amendment, Included In The National Defense Authorization Act (NDAA) For Fiscal Year 2023, Will Build On The Historic CHIPS And Science Act By Ensuring More Semiconductor Chips Used By The Federal Government Are Made In The U.S. 

Chips Made By Companies With Ties To The Chinese Communist Party Pose Grave Threats To National And Economic Security; New Legislation Will Help Protect Americans From Cyberattacks And Reduce U.S. Dependence On China 

Schumer, Cornyn, Wicker: U.S. Must Sever Reliance On Threatening Chinese-Made Chips

Washington, D.C. – U.S. Senate Majority Leader Chuck Schumer (D-NY), Senator John Cornyn (R-TX), and Senator Roger Wicker (R-MS) today announced that following their push, the bipartisan Schumer-Cornyn Amendment to prohibit the U.S. government from doing business with companies that rely on certain Chinese chipmakers with ties to the Chinese Communist Party (CCP) and Chinese military, including one that the Pentagon has labeled a “Chinese military contractor” and another that is already subjected to U.S. export controls, has been included in the National Defense Authorization Act (NDAA) for Fiscal Year 2023. Building on the provisions to supercharge the domestic semiconductor industry in the historic CHIPS and Science Act signed into law earlier this year, the Schumer-Cornyn amendment, championed alongside Senator Wicker, would eliminate the federal government’s use of chips manufactured by companies with ties to the CCP, strengthening national and economic security and helping to get ahead of future chip shortages.

“We must stand firm against China’s use of technology central to fuel their military expansion and plans for global dominance that threaten U.S. security, and that includes ensuring the U.S. government is not spending U.S. taxpayer money through federal contracts on Chinese chip companies that have been deemed Chinese military contractors by the Pentagon,” said Senate Majority Leader Schumer. “The Senate took a major step in reducing dependence on foreign-made semiconductors, including from China, by passing the CHIPS and Science Act earlier this year to boost domestic chip manufacturing. This amendment builds on that effort by further limiting dependence on dangerous Chinese-made chips by the federal government, shoring up protections for American cybersecurity, privacy, and defense, and ensuring more American-made chips are used by the government. It’s simple: the federal government should not be in the business of supporting Chinese-made chips that put our national and economic security at risk.”

“Congress has made great strides to bring semiconductor manufacturing back to American soil, and it is imperative that we slash the use of Chinese chips in U.S. supply chains,” said Senator Cornyn. “This amendment will help ensure taxpayer dollars aren’t spent on chips from Chinese military contractors for U.S. government contracts, and we must pass it as part of the defense authorization bill immediately.” 

“Reducing America’s reliance on Chinese chips and boosting domestic production is in the national interest, especially when it comes to our critical security systems,” Senator Wicker said. “I appreciate Leader Schumer and Senator Cornyn’s willingness to work with me on ensuring the language provides adequate time and protections for impacted industries to transition away from China.”

Chinese companies with known links to the CCP and Chinese military are actively selling microchips to companies that do business with the federal government, including contractors that support the U.S. military and critical infrastructure, making the U.S. more vulnerable to cyberattacks, potentially compromising classified material and the information and data of millions of Americans, and creating a high-risk dependence on Chinese-made chips. As microchips become increasingly inextricable from American society, used in everything from smartphones and household appliances to cars, as well as military technology and critical infrastructure, the lack of restrictions in federal procurement on Chinese-made chips creates significant vulnerability for national and economic security.

The Schumer-Cornyn Amendment to the NDAA prevents the U.S. government from purchasing and using semiconductors made by three Chinese companies, Semiconductor Manufacturing International Corporation (SMIC), ChangXin Memory Technologies (CXMT), and Yangtze Memory Technologies (YMTC), all with known links to Chinese state security and intelligence apparatuses. To avoid disruptions of supplies to the federal government, this provision is phased in over five years, which aligns with the five-year funding window in the CHIPS and Science Act to bring U.S. and allied nations’ semiconductor production online. The amendment also supports a new federal traceability initiative to work with the private sector to identify and replace Chinese-made chips in supply chains. These new prohibitions will help protect safe and trusted suppliers of semiconductor technology by limiting the proliferation of nefarious semiconductor products in federal supply chains, helping build more secure and resilient domestic supply chains. 

Specifically, the provision would:

1.      Protect National Security:

·         The Schumer/Cornyn amendment requires the U.S. government and its suppliers to understand their supply chains. It strengthens the security of defense and critical infrastructure systems, and consumer electronics by prohibiting U.S. government procurement of products that contain semiconductor chips from Chinese chipmakers with ties to the Chinese Communist Party (CCP) and the Chinese military. Systems require a variety of chips, new and old, that each perform a specific function. A single chip can cause an entire system to fail. The amendment ensures that the U.S. government, its suppliers, and U.S. taxpayers do not directly or indirectly fund the Chinese military and chips produced by Chinese chipmakers cannot be weaponized in products sold to the U.S. Government.

·         There is no justifiable reason for allowing Chinese military company chips in federal supply chains, including for the Department of Defense and critical infrastructure. SMIC is on the Commerce Department’s Entity List and the Treasury Department’s Chinese Military Industrial Complex Companies List, which together impose export restrictions and bans on U.S. capital. SMIC has also been named a “Chinese military contractor” by the Pentagon. YMTC was recently made subject to U.S. export controls by the Commerce Department, and YMTC and CXMT have been cited by bipartisan congressional leaders as posing similar threats.

2.      Reduce U.S. Dependence on China:

·         Relying on Chinese chips only strengthens China’s semiconductor industry while undermining U.S. national security and economic competitiveness. Without this amendment, companies would continue to purchase chips manufactured and sold below market prices by Chinese military companies. With chips underpinning nearly all technologies, this reliance jeopardizes the security of our supply chains. This amendment will strategically and responsibly help prevent future chip shortages.

3.      Promote Economic Security:

·         The amendment’s five-year implementation period provides more than ample time for companies to understand and strengthen their supply chains. Within this five-year period, companies that have previously relied on chips manufactured by SMIC, YMTC, and CXMT could source their chips from chipmakers outside of China, including more American-made chips.

4.      Mitigate Future Chip Shortages:

• Semiconductor manufacturers add capacity based on demand, which is why semiconductor manufacturers in the U.S. are able and willing to produce these chips at market prices. This amendment sends a signal to the private sector that if they want to do business with the U.S. government, they need to replace Chinese-made chips in their supply chains, opening up a new demand for American-made chips. That new demand, combined with the major infusion of federal investment from the CHIPS and Science Act to build the domestic semiconductor industry, will boost American manufacturing and jobs.

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