My Threatcon column was published on Counterterrorism magazine’s website.
You can read the column below:
Semiconductors: A Key Battleground Between the East
and the West |
By
Paul Davis |
It
has been said that American companies and the U.S. Government spend millions of
dollars on technological research and development. And the Chinese and the
Russians spend thousands of dollars stealing our R&D through espionage.
Appearing on CBS’s 60 Minutes on April 21st,
U.S. Commerce Secretary Gina Raimondo (seen in the below photo) stated that semiconductors have become a
key battleground between the U.S. and our adversaries, notably Russia and
China.
Noting that semiconductors are imperative for nearly every type of technology, and although American technological companies design the world's most advanced chips, none are manufactured in the U.S. Nearly all are manufactured in Taiwan, which possess a national security threat.
"We allowed manufacturing in this country to wither on the vine in search of cheaper labor in Asia, cheaper capital in Asia, and here we are," Raimonda told 60 Minutes correspondent Leslie Stahl. "We just pursued profit over national security."
Raimondo stated in a 2022 congressional hearing
that Russia had begun using semiconductors from dishwashers and refrigerators
for its military equipment used in the invasion of Ukraine. Raimondo stated
that the Russians are still working their way around the semiconductor issue.
"It's absolutely the case that our export
controls have hurt their ability to conduct the war, made it harder,"
Raimondo said. "And we are enforcing this every minute of every day, doing
everything we can.”
The U.S. issued export controls to prevent
American technology from being used in China in October of 2022. The
restrictions concerned advanced semiconductors and chip-manufacturing
equipment.
"We want to trade with China on the vast
majority of goods and services. But on those technologies that affect our
national security, no," Raimondo said.
While high-end microchips are used in some
consumer products, they're also used in nuclear weapons and surveillance
systems.
"We know they want these chips and our
sophisticated technology to advance their military," Raimondo
said. "We have the most sophisticated semiconductors in the world. China
doesn't," she said. "We've out-innovated China."
As 90 percent of the semiconductors are
manufactured in Taiwan, the Chinese threat to invade Taiwan would mean the U.S.
would no longer have access to the chips manufactured there.
"That's a problem," Raimondo said.
"It's a risk. It makes us vulnerable. China wakes up every day figuring
out how to get around our regulations. We've got to wake up every day that much
more relentless and aggressive."
Four days after Raimonda’s appearance on 60
Minutes, a federal indictment was unsealed charging two Chinese nationals, Han
Li, also known as Anson Li, 44, and Lin Chen, 64, with crimes related to a
conspiracy to illegally export U.S. technology. The technology includes a
machine manufactured by a California-based company that is used to process
silicon wafer microchips in violation of the International Emergency Economic
Powers Act (IEEPA) and Export Administration Regulations (EAR).
“As alleged, the defendants sought to evade
export controls to obtain U.S. semiconductor manufacturing technology for a
prohibited Chinese company,” said Assistant Attorney General Matthew G. Olsen
of the Justice Department’s National Security Division. “The Justice Department
is committed to enforcing export controls and holding accountable those who
seek to illicitly procure U.S.-developed technologies that put our national
security at risk.”
Larissa L. Knapp, the Executive Assistant
Director of the FBI’s National Security Branch, added, “This indictment puts an
end to Ms. Chen’s alleged involvement in a scheme to illegally export U.S.
technology to China. “The U.S. does not tolerate illegally exporting our
advanced technology, and any attempt to circumvent U.S. laws and regulations
will have consequences. The FBI and its partners will continue to seek justice
in this matter.”
According to the indictment, between at least
May 2015 and August 2018, Li and Chen conspired to evade the export
restrictions imposed by the Department of Commerce on CGTC through the use of
intermediaries to conceal CGTC’s involvement with the transactions.
Specifically, the defendants sought to illegally obtain a DTX-150 Automatic Diamond Scriber Breaker machine from Dynatex International, a Santa Rosa, California, company. The machine is used to cut thin semiconductors used in electronics, also known as silicon wafers, and under Department of Commerce regulations, requires a license and authorization to export to CGTC.
The
defendants sought to acquire the machine for CGTC through an intermediary
company called Jiangsu Hantang International (JHI), a proxy they fraudulently
represented as the purchaser and end user. To avoid detection, Li and Chen
instructed Dynatex International to ensure that the export information
associated with the sale did not list CGTC as the ultimate consignee of the
shipment.
According to the Justice Department, Li and Chen
are both charged with the following offenses, and if convicted, face maximum
penalties as indicated: Conspiracy to violate IEEPA, up to 20 years in prison
and a $1 million fine; false electronic export information activities, up to
five years in prison and a $250,000 fine; smuggling, up to 10 years in prison
and a $250,000 fine; and IEEPA violations, up to 20 years in prison and a $1
million fine. A federal district court judge will determine any sentence after
considering the U.S. Sentencing Guidelines and other statutory factors.
Chen was arrested in Chicago. Li is believed to be in China.
And this past January, a businessman was
arrested for scheming to illegally export semiconductors and other controlled
technology to Russia.
According to the U.S. Justice Department, the
defendant allegedly used a network of businesses in China and other Countries
to Illegally transfer hundreds of thousands of semiconductors to sanctioned
business with ties to Russian military and Russian intelligence agencies.
Ilya Kahn, 66, a citizen of the United States,
Israel and Russia, and resident of Brooklyn, New York, and Los Angeles,
California, was arrested in Los Angeles for his alleged involvement in a
long-term scheme to secure and unlawfully export sensitive technology from the
United States for the benefit of a Russian business that was sanctioned by the
U.S. government following Russia’s unprovoked invasion of Ukraine in February
2022. The business’ clients include elements of the Russian military and the
Federal Security Service (FSB), the main successor agency to the Soviet Union’s
KGB.
According to court documents, Kahn is charged by
criminal complaint with conspiracy to violate the Export Control Reform Act
(ECRA).
“Mr. Kahn stands accused of repeatedly exporting
sensitive technology to Russia before, during, and after Russia launched its
unprovoked invasion of Ukraine,” said Assistant Attorney General Olsen.
“Violations of U.S. sanctions and export control laws that aid Russia and other
hostile powers endanger our nation’s security and will be met with the full
force of the Justice Department.”
Assistant Secretary for Export Enforcement
Matthew S. Axelrod of the Commerce Department’s Bureau of Industry and Security
(BIS) also weighed in, “This arrest reflects our continued aggressive
enforcement of export control violations involving the Russian military and the
Federal Security Service. stopping the flow of semiconductors and sensitive
technologies to those aiding Russia’s unjust war in Ukraine is a critical
priority for BIS and our Disruptive Technology Strike Force partners.”
If convicted, Kahn faces a maximum penalty of 20
years in prison for conspiracy to violate the ECRA.
The FBI and Department of Commerce’s BIS New
York Field Office are investigating the case. The U.S. Attorney’s Office for
the Central District of California provided significant assistance.
Paul Davis’ Threatcon column covers crime,
espionage and terrorism.
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