Overlooked Chinese Chip Maker’s Military-Industrial Ties Revealed

A critical yet little-known chipmaker that supplies several big-name Chinese military companies is facing heightened scrutiny as a new report, expected today, will warn that Beijing wants to use the firm to increase foreign dependency on Chinese supply chains. Its release comes amid news that Congress this week watered down a bill to address that threat.

Although U.S. officials have trained their fire on certain large Chinese chip manufacturers such as SMIC and YMTC in recent years, ChangXin Memory Technologies (CXMT), based in China’s Anhui province, has long gone unnoticed. The company manufactures dynamic random-access memory-storage — or DRAM — chips that are necessary for some basic technologies, such as computer processors.

In the report that will be released today, the research outfit Horizon Advisory reveals CXMT’s extensive links to Chinese military firms as well as various government bodies. The report, obtained by National Review, warns that CXMT is using foreign tech to bolster the weaker parts of Chinese industry and then increase foreign dependency on those supply chains. Chinese state media have described this as a “bottleneck counterattack.”

“U.S. efforts to restrict Beijing’s advances in critical and emerging technology, including in the semiconductor value chain, risk failing to impose costs on Beijing if this bottleneck counterattack is not targeted — and defended against,” the report states.

CXMT got its start in 2016 with an investment by the Hefei city government. Subsequently, it purchased DRAM chip-making technology that originated with a now-defunct German chipmaker. (Later, the city’s Public Security Bureau started to partner with CXMT, the Horizon report finds.) The Horizon report also cites Chinese media reports on CXMT’s use of American technology and materials from various equipment manufacturers, tool suppliers, and other industrial players.

This is particularly noteworthy as the chipmaker has sold its products in recent years to several Chinese military-linked firms designated as such by Washington.

CXMT is a supplier for Huawei, drone-maker DJI, surveillance giant Hikvision, voice-recognition giant iFlytek, and China Mobile, all of which have significant ties to Chinese military-civil fusion efforts and are on a U.S. government list of Chinese military companies. In addition, CXMT has long-standing ties with SMIC, which was added to the Commerce Department’s export-ban list in 2020 over its own ties to China’s military–industrial complex.

Yet despite CXMT’s proximity to numerous entities targeted by U.S. efforts against China’s military-civil fusion, and the fact that its chips are advertised as “military-grade” on procurement websites, it has not itself faced any restrictions barring Americans from purchasing its components — raising the possibility that CXMT chips could eventually become deeply embedded in U.S. supply chains, including those of the defense industry. “Our industrial base should not rely on these players,” Horizon’s Emily de La Bruyère, one of the report’s co-authors, told NR.

While Washington has a range of tools to address CXMT’s rise, Congress this week demonstrated that a willingness to take meaningful action is wanting. That’s because the latest version of the National Defense Authorization Act, which Congress is expected to vote on and pass before the end of the year, includes only a watered-down version of a bipartisan amendment, offered by Senators Chuck Schumer and John Cornyn, that targets the company.

The amendment adds CXMT, alongside SMIC and YMTC, to a list of companies from which federal agencies and contractors are barred from procuring goods or services. But after several industry groups reportedly intervened, the proposal was significantly curtailed — certain waivers were added, in addition to a five-year period before it takes effect, and a provision that would have prevented federal contracts with firms that use CXMT chips was narrowed. In a letter last month, the U.S. Chamber of Commerce had warned that the bill as originally written was far too broad and risked inviting unintended consequences for federal contractors.

Despite the hollowing out of that amendment to the National Defense Authorization Act, the report’s findings could spur lawmakers to pressure the Commerce Department and other agencies to act. In recent months, lawmakers have pressured the Biden administration to prohibit U.S. exports to YMTC, and Horizon’s findings regarding CXMT could inspire a similar campaign.