China is building a thriving semi industry off US leftovers

"US export controls have had mixed results in stemming the flow of chipmaking equipment into China, according to a congressional investigation, which found US and allied companies sold $38 billion worth of semiconductor tools in 2024 alone. Those sales, it should be noted, were mostly older equipment that's either exempt from US export rules or was sold to unregulated parties in China. In other words, these equipment vendors did nothing wrong and were acting in compliance with US export control rules."

"However, according to the House Select Committee on the Chinese Communist Party (CCP), this fact alone highlights the flaws in current US trade policy, which pose a threat to the national and economic security of both the United States and its allies. "The People's Republic of China (PRC) is already fervently seeking to build a world-leading semiconductor manufacturing industry from raw materials through semiconductor manufacturing equipment to finished product," the committee report reads. "The United States and our allies should ensure the CCP's pursuit of this goal is as challenging and expensive as possible.""

"Further complicating the matter, several of the most sophisticated semiconductor toolmakers are located outside the US in places like the Netherlands and Japan. While these nations have largely aligned themselves around US trade policies regarding China, the committee notes their execution of these rules isn't always consistent. "While the Netherlands has denied extreme ultraviolet (EUV) lithography to the PRC market, the toolmakers have continued to provide vast quantities of highly capable SME that is not labeled as"

US export controls limited some advanced chip-equipment transfers but still permitted roughly $38 billion in semiconductor tool sales to China in 2024, largely older gear exempt from current rules or sold to unregulated Chinese parties. Vendors complied with existing export regulations while state-backed Chinese entities continued acquiring hardware not on restricted lists. Targeted blocks against firms like SMIC had some effect, but broader enforcement gaps and inconsistent implementation by allied countries such as the Netherlands and Japan enabled substantial flows of capable machinery, posing national and economic security concerns.

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