Export Controls:

Rapid Advances in China's Semiconductor Industry Underscore Need for Fundamental U.S. Policy Review

GAO-02-620: Published: Apr 19, 2002. Publicly Released: Apr 19, 2002.

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Since 1986, China has narrowed the gap between the U.S. and Chinese semiconductor manufacturing technology from between seven to 10 years to two years or less. China's success in acquiring manufacturing technology from abroad has improved its semiconductor manufacturing facilities for more capable weapons systems and advanced consumer electronics. The multilateral Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies has not affected China's ability to obtain semiconductor manufacturing equipment because the United States is the only member of this voluntary arrangement that considers China's acquisition of semiconductor manufacturing equipment a cause for concern. Under the Export Administration Regulations pertaining to China, the general licensing policy is to approve applications, except those items that would make a direct and significant contribution to specific areas of China's military. Furthermore, U.S. agencies have not done the analyses, such as assessing foreign availability of this technology or the cumulative effects of such exports on U.S. national security interests, necessary to justify such a practice or serve as the basis for licensing decisions. Consequently, the executive branch lacks a sound, well-documented basis for making export-licensing decisions to China.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: A May 16, 2006, letter from the Deputy Assistant Secretary, Bureau of Industry and Security, Department of Commerce, reported that the Department has not self-initiated any such assessments, nor have any been requested by industry. Therefore, this recommendation is being closed out as "not implemented."

    Recommendation: To improve the effectiveness of the U.S. export control system, the Secretary of Commerce should work with the Secretary of Defense and the Secretary of State to reevaluate, clarify, and document export policy on semiconductor manufacturing equipment and materials. These actions should include conducting assessments of foreign availability, the technical parameters necessary to ensure critical U.S. military capabilities, the impact of export controls on U.S. industry, and the overall national and economic security implications of China's ability to import, produce, and develop advanced semiconductor-related technology.

    Agency Affected: Department of Commerce

  2. Status: Closed - Not Implemented

    Comments: On March 1, 2006, GAO requested Commerce's Bureau of Industry and Security to specifically identify the actions taken in response to our 2002 report recommendations. In a May 2006 response, Commerce described various activities it undertakes to regularly update its export control policies, procedures, and regulations. However, none of these activities were specifically attributed to our report recommendation. Therefore, this recommendation is being closed out as "not implemented."

    Recommendation: To improve the effectiveness of the U.S. export control system, the Secretary of Commerce should work with the Secretary of Defense and the Secretary of State to reevaluate, clarify, and document export policy on semiconductor manufacturing equipment and materials. These actions should include developing new export controls if the technology needs to and can be controlled, and updating related regulations and policy documents including the Military Critical Technologies List and Department of Defense Directive 2040.2. If the technology cannot be controlled using export controls, the Secretary of Commerce should work with the Secretaries of Defense and State to develop alternative means for protecting U.S. security interests.

    Agency Affected: Department of Commerce

  3. Status: Closed - Not Implemented

    Comments: On March 1, 2006, GAO requested Commerce's Bureau of Industry and Security to specifically identify the actions taken in response to our 2002 report recommendations. In a May 2006 response, Commerce described various activities it undertakes to regularly update its export control policies, procedures, and regulations. However, none of these activities were specifically attributed to our report recommendation. Therefore, this recommendation is being closed out as "not implemented."

    Recommendation: To improve the effectiveness of the U.S. export control system, the Secretary of Commerce should work with the Secretary of Defense and the Secretary of State to reevaluate, clarify, and document export policy on semiconductor manufacturing equipment and materials. These actions should include communicating the results of the assessments and the options for controlling the technology and protecting U.S. security to the U.S. Congress and industry.

    Agency Affected: Department of Commerce

 

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