US Republicans seek federal curbs on EDA sales to China

EDA companies have so far maintained a lower profile in the Sino-US face-off over semiconductors but two Republican politicians have now called for the industry to come under a blanket licensing scheme covering exports to China.

Senator Tom Cotton (R-Arkansas) and Representative Michael McCaul (R-Texas) propose subjecting US EDA sales in China to review by the Bureau of Industry and Security (BIS) in a letter sent earlier this week to Commerce Secretary Gina Raimondo.

The call would carry more weight if there were also Democrat politicians on board but still reflects increasing nervousness in Washington over China’s ambitions in the chip market, particularly in dual-use civilian-military technologies, and the country’s influence over the supply chain.

Cotton and McCaul have made their pitch for an expanded licensing regime in the light of the alleged use of processors from “an ostensibly civilian” Chinese company, Phytium, at a local military research facility for hypersonic weapons, chips that it is claimed were designed with US software.  Phytium has since joined Huawei, along with a number of other Chinese companies in the supercomputing space, on the US Entity List that tightly constrains technology transfers.

Meanwhile earlier this week, the White House convened a virtual ‘CEO Summit’ on current bottlenecks in the semiconductor supply chain as well as the need to rebalance fab capacity away from Asia in the long-to-medium term. Cotton and McCaul also offer some of their thoughts on tighter licensing at the fab level for production at 14nm and below.

In all, their letter makes the following specific recommendations:

1. While we support reports that the Department of Commerce is placing Phytium on the Entity List—we hope with a licensing policy of a presumption of denial—the Commerce Department must supplement this action with a Foreign-Direct Product Rule (FDPR) Footnote number 1. An entity listing would restrict sales of EDA tools to Phytium, but a FDPR Footnote number 1 would require any fab globally that uses American tools to obtain a Bureau of Industry and Security (BIS) license to fabricate a Phytium-designed semiconductor chip. Anything short of using the FDPR would be a half measure masquerading as a forceful action.
2. The Department of Commerce should immediately designate EDA software as a Foundational Technology, which would require all US EDA companies to get a BIS license before exporting any product to the PRC. The Department of State and Commerce should also propose similar controls at the Wassenaar Arrangement.
3. BIS should also develop a FDPR footnote number 1 that applies to any PRC company designing semiconductor chips at or below 14nm. This would ensure that no fab with American tools could make a 14nm or below chip for any PRC company without first obtaining a BIS license. 
4. The Department of State and Commerce must engage the Taiwanese government to develop a more effective end-user screening system to mitigate the risk of Taiwanese companies providing services and technologies to entities of concern. It is not in the security interests of Taiwan or the United States for companies like Taiwan Semiconductor Manufacturing Corporation to make advanced semiconductor chips for the PRC’s military.