Congress Targets Advanced Chip-Making Equipment To Stifle Chinese Progress in AI Race

Congress is seeking to lock China out of the global advanced chip-making market.

Senators Pete Ricketts (R-NE) and Andy Kim (D-NJ), along with Representative Michael Baumgartner (R-WA), introduced a bill on April 2 intended to tighten export controls on high-end semiconductor manufacturing equipment flowing to foreign adversaries, namely China. The bill would also harmonize these tighter restrictions with U.S. allies and partners, particularly the Netherlands and Japan, both of which produce key chipmaking components for the Chinese market.

If adopted, the legislation would seal off access to the most important components Beijing currently lacks as it seeks to accelerate its domestic semiconductor industry and build out its artificial intelligence (AI) sector.

Congress Seeks To Restrict Chinese Access to Domestic and Allied Chipmaking Equipment

The proposed bill explicitly bans American firms from selling or servicing advanced chipmaking tools to any non-U.S. or allied-controlled foundry located within a foreign adversary of concern. The bill also includes trade sanctions on major Chinese chipmakers, including Xin Memory Technologies, Semiconductor Manufacturing International Corp., and Yangtze Memory Technologies Corp. Congress previously banned these firms from selling to the federal government under the 2023 National Defense Authorization Act due to their alleged ties to both Beijing and the Chinese military.

The proposal also provides an incentive for U.S. allies and partners that produce key chipmaking equipment, particularly Japan and the Netherlands, to strengthen their export controls in line with American standards. The bill offers a 150-day window for allies and partners to demonstrate progress on tightening trade restrictions before the Department of Commerce would unilaterally intervene under the Foreign Direct Product Rule — a mechanism which offers jurisdiction to the department to control the flow of components produced using American technology.   

China Cannot Build Advanced Chips at Scale — Yet

Despite Beijing heavily subsidizing domestic semiconductor production for nearly a decade, Chinese firms remain incapable of producing highly advanced chips at an appreciable scale. While Chinese foundries dominate legacy semiconductor production, even leading producers such as Huawei claim they remain two years behind current market leaders — the country’s largest domestically-sourced data center reportedly holds only 9,000 chips, roughly 1 percent the size of the largest U.S. data center. This shortfall has imposed significant costs on Chinese AI development, as Chinese firms must dedicate greater financial resources to stacking together less-powerful domestic chips to achieve similar results to U.S. and allied competitors, producing a punishing cost curve as frontier models require ever-greater computing power.

This shortfall has also driven China to pursue industrial espionage as a strategy to circumvent pre-existing export controls. Chinese state-aligned hackers executed a series of cyberattacks against Taiwanese chipmakers in September 2025 to steal chip designs and equipment blueprints. Beijing has also stepped up its efforts to illicitly recruit Taiwanese foundry employees. China has also targeted European firms directly, with Dutch equipment manufacturer ASML claiming in March 2023 that the firm had faced thousands of cybersecurity incidents, many of which were tied to well-known Chinese cyber actors. Chinese firms also rely on imports for key chipmaking inputs. Prior to April 2024, ASML continued to service its high-end machines located in the country, while Japanese firms still provide a key source of the country’s supply of photoresist, a key component in producing circuit patterns.

Washington Should Tighten Controls Over Key Technologies

Accessing high-end chip-making technology represents the last major hurdle for China to clear as it seeks to develop its domestic AI industry. Washington should rightly focus on raising barriers to access, in concert with its allies and partners, prioritizing cooperation over coercion and leaving unilateral controls as a last resort. Moreover, these measures should encompass more than stronger customs enforcement; it should include cooperation on industrial cybersecurity and research security to prevent Chinese firms from illicitly accessing proprietary information.

The United States should also implement its current bans on Chinese chipmakers more effectively, including strengthening prohibitions on federal agencies, contractors, and sub-contracts from relying on products and services that include components from Beijing’s state-supported foundries.

Jack Burnham is a senior research analyst in the China Program at the Foundation for Defense of Democracies (FDD). For more analysis from Jack and FDD, please subscribe HERE. Follow FDD on X @FDD. Follow Jack on X @JackBurnham802. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.