US Must Press Allies on Chipmaking Export Loopholes to China: Experts

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Nov 21, 2025 - 11:04 Updated: Nov 21, 2025 - 10:55
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US Must Press Allies on Chipmaking Export Loopholes to China: Experts

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The United States has extensive licensing requirements in place to keep Beijing from obtaining some of the most advanced chips in the world, but much of the equipment used to develop those advanced chips can still be legally purchased by Chinese companies because of loopholes, U.S. lawmakers learned on Nov. 20.

Experts testified to the House Foreign Affairs South and Central Asia Subcommittee that export controls on semiconductor manufacturing equipment are a critical leverage point that the United States holds over Beijing.

A congressional report released in October found that Chinese entities, mostly state-owned enterprises, legally purchased $38 billion of such equipment in 2024.

Rep. Bill Huizenga (R-Mich.), chairman of the subcommittee, said the loopholes provide other countries “a free pass” to sell the equipment to China.

Making advanced semiconductors involves a complex manufacturing process that uses specialized equipment sourced from a select few companies around the world.

A critical gap in the export controls to China arises when different countries have different standards for how they restrict technology transfers to the communist country.

Chris McGuire, senior fellow for China and emerging technologies at the Council on Foreign Relations, said allies’ export controls are “not as comprehensive” as those of the United States. Exceptions have been made to allow allies such as Japan and the Netherlands to create their own rules.

As a result, semiconductor manufacturing equipment was “the number one or number two export” from the United States, the Netherlands, and Japan to China in 2024, McGuire said.

McGuire said this gap can effectively be closed by banning exports to China of semiconductor manufacturing equipment containing any U.S. technology, rather than using the current, targeted approach.

Beijing Feuds With Netherlands, Japan

Experts also highlighted diplomacy as a possible solution for strengthening allies’ export controls to China.

The extreme ultraviolet lithography machines produced by only the Dutch company ASML were a recurring topic of discussion in the hearing because the smallest, most advanced chips cannot be made without them.

McGuire described this machine as “a controlled lightning storm built inside a vacuum chamber the size of a bus.”

Foundation for American Innovation senior fellow Dean Ball said its precision capability is “akin to hitting a hole-in-one on the Moon from Earth.”

The Netherlands has prohibited ASML from selling these extreme ultraviolet lithography machines to China, which is years away from developing functional alternatives.

The Dutch government was recently mired in a feud with Beijing after it seized control of chipmaker Nexperia, which has a Chinese parent company, and ousted its Chinese CEO. Beijing retaliated by seizing control of Nexperia’s Chinese factory lines and corresponding with clients directly, cutting out management at the Dutch headquarters.
On Nov. 19, the Dutch government relinquished control of the chipmaker amid negotiations with Beijing. Dutch Minister of Economic Affairs Vincent Karremans said in a Nov. 19 post on X that the move was “a show of goodwill.”

Japan’s Tokyo Electron is another key supplier of semiconductor manufacturing equipment, producing a wide range of machinery used to make chips. Ball said sales of foreign semiconductor manufacturing equipment to China jumped after U.S. export controls were imposed on U.S. companies. Tokyo Electron reported in April that its proportion of sales to China remained higher than 40 percent until the fourth quarter of fiscal year 2025, when it declined to 34.3 percent.

Japan’s new prime minister, Sanae Takaichi, is widely regarded as maintaining a hardline stance on the Chinese communist regime. Her recent support for Taiwan prompted remarks from a Chinese diplomat about beheading Takaichi, resulting in escalating tensions.

Takaichi has said Japan’s relationship with the United States is its most important strategic partnership and has signed memorandums of understanding with the United States.

Ball and McGuire both recommended using country-wide controls, rather than targeting specific companies.

‘Horse Is out of the Barn’

Rep. Sydney Kamlager-Dove (D-Calif.), ranking member of the subcommittee, pointed out that the administration may not act on the recommendations, given the trade tensions with Beijing seen this year.
President Donald Trump had ordered federal agencies to find and close loopholes in semiconductor-related export controls to China in his inauguration day America First Trade Policy memorandum, but these export control rules have become a point of negotiation with Beijing.
The Treasury Department’s Bureau of Industry and Security on Sept. 29 closed a key export control loophole, extending restrictions to subsidiaries of blacklisted companies, only to have the move suspended for one year weeks later when Trump met Chinese communist leader Xi Jinping for a bilateral meeting that secured a pause of Beijing’s sweeping critical minerals restrictions.

Rep. Michael McCaul (R-Texas), who introduced the Chips for America Act at the behest of then-Secretary of State Mike Pompeo during the first Trump administration to bring advanced chip manufacturing to the United States, expressed a sense of urgency in getting restrictions right for developing technologies.

He pointed out that a lot of China’s most advanced technologies were created with the use of U.S. technologies that were legally available to China at the time.

“The horse is out of the barn,” he said.

“DeepSeek is disturbing to me, because we sold it to them,” McCaul said, referring to the degraded Nvidia chips that were designed to meet export control rules. “And it was legal. It would be illegal under current law, but the damage is done.”

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