According to Reuters, the bipartisan U.S. House Select Committee on China’s latest investigation revealed that in 2024, the People’s Republic of China (PRC) bought $38 billion of semiconductor manufacturing equipment from U.S. and allied firms, despite export restrictions.
The report cites five major equipment suppliers — Applied Materials, Lam Research, KLA, ASML, and Tokyo Electron — which together accounted for a large share of those sales.
The committee warns that gaps and inconsistencies in export control regimes across the U.S. and its allies allowed Chinese firms to legally purchase advanced tools, thereby enabling China’s chip industry to build more capacity despite restrictions.
The report accuses major chip equipment makers of overlooking human rights abuses in order to support Beijing’s semiconductor industry, a sector viewed as critical to China’s growing military power:
Today, following a months-long investigation, Select Committee on China Chairman John Moolenaar (R-MI) and Ranking Member Raja Krishnamoorthi (D-IL) uncovered alarming new information revealing that companies in America and allied nations —including ASML in the Netherlands, Tokyo Electron (TEL) in Japan, and Applied Materials, KLA, and Lam Research in the United States—fueled semiconductor manufacturing in China and made sizeable returns selling equipment to Chinese state-owned and military-linked companies.
“The Select Committee has revealed that companies in this investigation are large-scale producers of equipment that China is using to fuel its military ambitions. They are growing their profits at the expense of U.S. national security. We must not allow this critical equipment to be handed over to our foremost adversary, or America could lose the technology arms race,” said Chairman Moolenaar.
“It makes little sense to sell the CCP the chips they need to modernize their military and violate human rights. But it makes even less sense to sell them the machines and tools they need to produce those chips themselves. This bipartisan investigation reveals that the scale of these sales by Dutch, Japanese, and American firms is even more vast than we realized. Alongside our allies, we need to protect our national security and ensure we remain the world’s leading innovators in SME,” said Ranking Member Krishnamoorthi.
The numbers are staggering: in 2024, TEL received 44% of its revenue from China, Lam Research received 42%, KLA received 41%, and ASML and Applied Materials received 36%.
Additionally, SME companies are selling to entities known for their connections to the PRC’s military and intelligence apparatus. The investigation reveals that five companies identified by the U.S. government as posing serious national security concerns are top customers of the SME makers, including associates of Huawei.
The SME makers are also fueling China’s state-owned enterprises (SOEs). In 2022, the companies sold $9.5 billion worth of SME to PRC SOEs, representing 11% of their overall revenue and 42% of their PRC-based revenue. By 2024, this had grown to $26.2 billion, 27% of overall revenue, and 69% of PRC-based revenue.
Other key findings of the investigation include that Dutch and Japanese firms have increased their revenues from PRC entities as the U.S. imposed controls, and that the CCP appears to stockpiling lithography equipment at sophistication levels just below where current restrictions apply.
In their initial letters to the companies, Moolenaar and Krishnamoorthi warned of boosting the PRC’s semiconductor industry, writing, “[t]he PRC is now the largest market for semiconductor manufacturing equipment, and it is stockpiling semiconductor manufacturing equipment to bolster its national self-sufficiency in a long-term competition with the United States.”
U.S. officials warn that China’s drive to develop its semiconductor industry carries profound national security risks. On the military front, advanced chips could power weapons systems for the People’s Liberation Army, enhancing Beijing’s capacity for “intelligentized” warfare that relies heavily on artificial intelligence and high-performance computing — technology that could ultimately be turned against American and allied forces.
Trade considerations also loom large. By building a self-sufficient, vertically integrated semiconductor industry, China aims to insulate its economy from U.S. and allied export restrictions, weakening a key tool of Western leverage.
The economic stakes are equally significant. Should China secure dominance in both legacy and cutting-edge chip production, it would command an outsized influence over global supply chains, potentially using that position as a strategic weapon against American security interests.
Finally, the human rights dimension remains central. As earlier Select Committee investigations have documented, the Chinese Communist Party has already deployed AI and high-performance computing to monitor its population, suppress dissent, and export its model of digital authoritarianism worldwide.
Shares of the companies fell sharply after the report’s release. Investors are concerned about the possibility of regulatory crackdowns, tighter export controls, and potential retaliation from Beijing.
For instance, Applied Materials already flagged a $600 million revenue hit in 2026 from expanded export curbs, and its shares dropped ~3% in extended trading after that announcement.
Analysts are revising growth expectations downward, especially for companies heavily exposed to Chinese demand or reliant on sales of advanced chipmaking tools.
The revelation intensifies political risk — firms may be subject to congressional or regulatory scrutiny, liability, or new licensing constraints.
While export controls aren’t new, the report suggests enforcement and coordination among U.S. and allied countries is weak, which undermines their deterrent effect.
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If we can make that equipment, then why do we not have American companies making the chips? That way the Chinese could not hold us over a barrel. Does not make much sense.