US says chip production for Chinese shell companies violates rules

U.S. Deputy Commerce Secretary Jeffrey Kessler asserted that chip manufacturers producing for Chinese shell companies are in violation of regulations, and that the U.S. government possesses the authority to investigate these activities. Speaking at a House hearing, Kessler stressed that the existing regulations are robust and contain no loopholes, underscoring the administration's commitment to safeguarding American technological advancements.

The hearing focused on the enforcement of U.S. restrictions on chip exports to China. Representative Young Kim highlighted a report indicating that Huawei allegedly used shell companies to procure approximately 3 million AI chips from TSMC in 2024. Kessler confirmed that the Bureau of Industry and Security (BIS) has implemented rules to prevent such occurrences since the issue came to light, addressing concerns that Chinese entities might exploit overseas subsidiaries in countries like Malaysia and Singapore.

Kessler clarified that chip makers providing advanced AI chips to entities in countries subject to export controls, or to front companies for such entities, are indeed violating regulations. He reiterated that protecting U.S. technology from being acquired through indirect channels by China is a primary objective for the BIS. The discussion also touched upon the export of Nvidia's H200 chips, with Kessler confirming limited shipments to China and Hong Kong, which have been approved but are subject to strict oversight.