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With Upstate NY Growing As a Global Hub For The Microchip Industry, Thanks To Schumer’s Historic CHIPS And Science Law, Senator Delivers New Amendment In Defense Bill To Ensure More Semiconductors Used By The Feds Are Made In The USA

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

Schumer: It Is Time To Sever America’s Reliance on Unsecure Chinese-Made Chips – And Have The Future Of Technology Stamped ‘Made In Upstate NY’

After launching an all-out push started in Albany and Syracuse, U.S. Senate Majority Leader Charles E. Schumer today announced his bipartisan amendment to prohibit the U.S. government’s use of certain semiconductor chips made in China has been included in the National Defense Authorization Act (NDAA) for Fiscal Year 2023. This builds on Schumer’s historic CHIPS and Science Bill, which is already drawing major semiconductor investment to Upstate New York, to reduce U.S. reliance on Chinese-made chips from companies with known links to the Chinese Communist Party (CCP) and military. Schumer said this amendment will help limit the prevalence of these Chinese-made chips in federal government supply chains, strengthening national security, keeping New Yorkers’ data safe, and boosting demand for more domestically made microchips, including from places like Upstate New York.

“It’s simple: the federal government should not be in the business of buying certain Chinese-made chips that put our national and economic security at risk. Because of my CHIPS and Science bill, Upstate New York is seeing unprecedented investment and thousands of new jobs rebuilding American microchip manufacturing. Now, because of my amendment, U.S. taxpayer money will stop going to dangerous Chinese-government affiliated chip companies, backed by the Chinese military and ruling party, and instead support semiconductors made here in America, in places like Upstate New York,” said Senator Schumer. “To win the 21st century we need to secure our supply chains, and this amendment puts our national security, privacy, and defense first, by making sure the future of the federal government’s chips is built in places like the Capital Region not China, in places like Syracuse not Shanghai.”  

Schumer explained that semiconductor technology is essential not only in our daily lives, with microchips being used in everything from smartphones and household appliances to cars, but also is vital to our national security with our military technology and critical infrastructure fully reliant on these chips. Currently, however, 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 and potentially compromising classified material and the information and data of millions of Americans and New Yorkers.

Schumer’s bipartisan amendment, introduced with Senator John Cornyn (R-TX), that was just included in the NDAA will directly address this problem by preventing the U.S. government from purchasing and using semiconductors from certain dangerous Chinese companies. Specifically, the legislation will limit the federal procurement of products or services that uses microchips produced from three major Chinese suppliers, 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.

Schumer said his provision will help reduce the U.S. dependence on China and protect national security by ensuring that the U.S. government, its suppliers, and U.S. taxpayers do not directly or indirectly fund the Chinese military. This provision will also help ensure that chips produced by Chinese chipmakers cannot be weaponized in products sold to the U.S. Government, and will help position Upstate New York to supply more chips needed by our military and other critical infrastructure by replacing Chinese-made chips in the supply chains of companies that do business with the U.S. government.

To avoid disruptions of supplies to the federal government, the provision is phased in over five years and 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 procurement, helping build more secure and resilient domestic supply chains.

Specifically, Schumer said the provision would:

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. 

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.

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.

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. 

Schumer has been the leading champion of bringing semiconductor manufacturing back to America and has a long history of fighting to secure microchip investment for Upstate New York. Going back to 2019, Schumer proposed a major tech investment “moon shot” in cutting-edge technologies like semiconductors to out-compete China. Schumer then spent the next three years working to pass into law this vision – ultimately manifesting itself into the CHIPS and Science Act, which makes a generational investment in innovation and manufacturing, including providing over $52 billion in new federal incentives for microchip manufacturing and research and development in the U.S., along with the creation of a new federal investment tax credit to support the expansion of domestic microchip production.