In this week's edition:

• Presidential Race in Taiwan 
• Calls for House Vote on Reducing Double Taxation for Taiwanese Companies 
• Commerce Department to Collect Intelligence on China’s Chipmakers 
• China Continues Export Controls Over Raw Materials 
• Senator Urges for Sanctions on Chinese Chip Design Firm 
• SMIC Developing 5nm and 3nm Process Technologies Despite U.S. Sanctions 
• U.S. Chips Flow from China to Russia 
• China-Russia Relations Strengthen 
• Lawmakers Question Chinese Companies’ Data Practices 
• Biden Administration Considering Increasing Tariffs on Chinese Electric Vehicles 
• U.S.-China Military-to-Military Communication 
• Micron & Fujian Jinhua Integrated Circuit Co. Settle Lawsuit

Current polling of Taiwan’s presidential candidates reveals that 35% of those polled support Lai Ching-te (Democratic Progressive Party), 31.7% support Hou Yu-ih (Kuomintang), and 18.2% favor Ko Wen-je (Taiwan People’s Party). In another poll conducted by a newspaper friendly to the KMT, Hou and Lai are tied at 31%. The election is set for January 13^th.

Should the ruling DPP win re-election, their more pro-independence, or at least further autonomy, policy platform will cause friction with China. This would potentially provoke a Chinese reaction, most likely economic, against Taiwan and increase global geopolitical tensions. Moreover, a pro-independence win in the election would likely encourage the hawkish lawmakers of both parties in the U.S. Congress which view Taiwan as a second China.

Lawmakers are supportive of H.R. 5988, which would reduce double taxation for U.S. and Taiwanese businesses, and are pushing for a House floor vote following its passage through House Ways & Means in November. H.R. 5988 also has support in the Senate.

The U.S. Commerce Department is set to begin collecting information on the production of legacy semiconductors by Chinese companies. The move is aimed to assess the extent of U.S. companies’ reliance on Chinese technologies.

In January, the Bureau of Industry and Security (BIS) will conduct a survey involving over 100 companies in the automotive, aerospace, defense, and other sectors to gain insights into their processes for the acquisition and utilization of legacy chips.

“Over the last few years, we’ve seen potential signs of concerning practices from the People’s Republic of China (PRC) to expand their firms’ legacy chip production and make it harder for U.S. companies to compete,” Commerce Secretary Gina Raimondo said in a statement. The survey will “inform our next steps,” she added.

As the Commerce Department launched its initiative to gather information on legacy chip supply chains, China is imposing export controls on rare earth processing technologies. The Chinese government released an updated version of its “Catalogue of Technologies Prohibited and Restricted from Export,” this week. While there were additions this year of rare earth refining and processing technology, solar technologies were surprisingly not included.

Sen. Marco Rubio (R-FL) urged the Biden administration in a letter to place sanctions on Chinese chip design firm Brite Semiconductor over its connections to SMIC and its work for Chinese military suppliers.

Sen. Rubio expressed concern that Brite and other Chinese companies have access to American technologies, highlighting that existing export controls are continuing to allow China to increase its technological abilities.

"Brite's example shows that swift action is needed now to prevent China's chip industrial base from growing stronger," Rubio wrote in the letter to the Secretary of the Department of Commerce Gina Raimondo. "I urge you to impose the same licensing requirements on Brite that are imposed on SMIC," Rubio stated.

A report from Nikkei has stated that despite U.S. sanctions limiting access to advanced chip equipment, SMIC remains committed to developing beyond 7nm fabrication processes, such as 5nm and 3nm. The report states that SMIC has allocated a research and development team to focus on 5nm and 3nm process technologies, citing two sources familiar with the matter.

U.S. semiconductors made by Texas Instruments (TI) and Analog Devices have been found to reach military-linked companies in Russia via illicit trade from China. Despite the 2 companies ceasing sales to Hong Kong and Russia, over 200 Russian businesses received 17,000 TI chips in the first half of 2023. 2 Hong Konger companies responsible for sending shipments to Russia were sanctioned by the U.S. in October for sending goods to military-linked companies in Russia. In June of 2023, Hong Kong overtook China for the jurisdiction sending most chips to Russia. In responding to the situation, TI acknowledged that their chips could have been in Hong Kong or Russia prior to the sanctions.

President Xi Jinping met with Russian Prime Minister Mikhail Mishustin and spoke positively on the state of relations between the 2 nations. Xi celebrated their bilateral trade reaching the $200 billion target. Xi said, “Maintaining and developing China-Russian relations well is a strategic choice made by both sides on the basis of the fundamental interests of the two peoples.”

House Energy & Commerce Committee Chairwoman Cathy McMorris Rodgers (R-WA) and Innovation, Data, and Commerce Subcommittee Chairman Gus Bilirakis (R-FL) sent a letter to TikTok, Whaleco Inc., Alibaba, and Shein expressing concerns about the Chinese companies’ data privacy practices, as well as these companies’ counterfeit goods policies and allegations of human rights violations. The letter states, “Lax policies and practices are leaving American’s data at risk of theft, leading consumers to unknowingly purchase counterfeit goods. In addition to these lax policies and practices, it is important to ensure that supply chains are free of forced labor.” The letter to each company may be accessed here.

The Wall Street Journal recently reported that the Biden administration is considering increasing tariffs on electric vehicles and other Chinese exports to support the U.S. clean energy industry. While the Biden administration has left in place some $300 billion in tariffs on Chinese exports set in place by the Trump administration, it is now debating if the controls should be adjusted.

A 25% tariff is currently applied to Chinese electric vehicles to dissuade companies from establishing a presence in the United States. U.S. government officials are also holding talks over increasing tariffs on Chinese solar products and electric vehicle battery packs.

Senior Chinese military official Liu Zhenli and Chairman of the Joint Chiefs Charles Brown held a video call in which Liu called for the U.S. to respect China’s sovereignty in the South China Sea and warned against interference in Taiwanese issues.

Micron and Chinese company Fujian Jinha Integrated Circuit settled an intellectual property theft lawsuit in which both companies agreed to drop their arguments against the other firm. Previously, China restricted Micron chips from being used in its critical infrastructure which the company said would impact its global revenue by a “low-double-digit percentage.” In an effort to gain better relations with China, Micron has pledged a $602 million investment in its China-based plant.

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