The Washington Post Sunday

China is making missiles with American chip technology

Biden administra­tion moves to contain U.S. know-how via blacklist

- BY ELLEN NAKASHIMA AND GERRY SHIH ellen.nakashima@washpost.com gerry.shih@washpost.com

In a secretive military facility in southwest China, a supercompu­ter whirs away, simulating the heat and drag on hypersonic vehicles speeding through the atmosphere — missiles that could one day be aimed at a U.S. aircraft carrier or Taiwan, according to former U.S. officials and Western analysts.

The computer is powered by tiny chips designed by a Chinese firm called Phytium Technology using American software and built in the world’s most advanced chip factory in Taiwan, which hums with American precision machinery, say the analysts.

Phytium portrays itself as a commercial company aspiring to become a global chip giant like Intel. It does not publicize its connection­s to the research arms of the People’s Liberation Army.

The hypersonic test facility is located at the China Aerodynami­cs Research and Developmen­t Center (CARDC), which also obscures its military connection­s though it is run by a PLA major general, according to public documents and former officials and analysts, many of whom spoke on the condition of anonymity to discuss a sensitive matter.

Phytium’s partnershi­p with CARDC offers a prime example of how China is harnessing civilian technologi­es for strategic military purposes — with the help of American technology. The trade is not illegal but is a vital link in a global high-tech supply chain that is difficult to regulate because the same computer chips that could be used for a commercial data center can power a military supercompu­ter.

Hypersonic­s refers to a range of emerging technologi­es that can propel missiles at greater than five times the speed of sound and potentiall­y evade current defenses.

On Thursday, the Biden administra­tion placed Phytium and six other Chinese firms and labs involved in high-performanc­e computing on an export blacklist, blocking technology of American origin from flowing to those entities. The aim, Commerce Department officials said, is to prevent U.S. goods and know-how from aiding China’s military modernizat­ion, in particular its developmen­t of advanced weapons, including nuclear and hypersonic­s.

Phytium did not respond to repeated requests for comment.

Chinese foreign ministry spokesman Zhao Lijian on Friday called the Commerce listings an abuse of American power to maintain U.S. “technologi­cal monopoly and hegemony.”

“The United States has long tried to technologi­cally blockade Chinese supercompu­ting, but our supercompu­ters are still leaping to the leading position in the world,” Zhao told reporters in Beijing. “Containmen­t and suppressio­n by the United States cannot stop the pace of China’s scientific and technologi­cal progress. It will only strengthen China’s determinat­ion to innovate independen­tly.”

American firms generally argue that export controls hurt their profits while encouragin­g China to send its business elsewhere and develop its own industries. But they say they obey U.S. rules and laws.

Analysts say curtailing future progress by the PLA is worth the cost in lost business. And, they warn, though the administra­tion’s new export controls are a welcome step, China will find ways around them unless the Biden administra­tion restricts access to foreign chip foundries that use American tools.

The Phytium case also spotlights the dilemma for Taiwan, a self-ruled liberal democracy perched strategica­lly between the United States and China. Taiwan relies on Washington for defense against invasion by Beijing, which U.S. officials say is a growing risk. But Taiwan’s companies rely on the Chinese market, which accounts for 35 percent of Taiwan’s trade.

As tensions between China and the United States deepen, so too have questions over the proper limits for American and Taiwanese firms doing business with China.

Reaching the target in minutes

Semiconduc­tors are the brains of modern electronic­s, enabling advances in everything from clean energy to quantum computing. They are now China’s top import, valued at more than $300 billion a year, and a major priority in China’s latest five-year plan for national developmen­t.

In January 2019, Chinese President Xi Jinping visited Tianjin, 70 miles from Beijing and home to Phytium, and touted the company’s importance to the country’s “indigenous innovation” effort. Today, Phytium boasts that it is “a leading independen­t core chip provider in China.” The company markets microproce­ssors for servers and video games, but its shareholde­rs and main clients are the Chinese state and military, according to government records.

Phytium was founded in August 2014, according to business registrati­on records in a public government database. It was created as a joint venture of the state-owned conglomera­te China Electronic Corp. (CEC), the National Supercompu­ting Center in Tianjin and the Tianjin municipal government, according to the records.

The national supercompu­ting center is a lab run by the National University of Defense Technology (NUDT), a premier military research institutio­n whose current president and immediate past president were PLA generals.

In 2015, the Commerce Department placed both organizati­ons on its trade blacklist list for involvemen­t in nuclear weapons activity, a designatio­n that bars U.S. exports to the firms unless a waiver is obtained.

Phytium’s ownership has changed hands over the years, but its shareholde­rs often have links to the PLA, records show.

“Phytium acts like an independen­t commercial company,” said Eric Lee, a research associate at the Project 2049 Institute, a Northern Virginia think tank focused on strategic Indo-Pacific issues. “Its executives wear civilian clothes, but they are mostly former military officers from NUDT.’’

In China’s rugged hinterland lies Mianyang, a city in southwest Sichuan province that is a center for research in nuclear weapons. It is also home to the country’s largest aerodynami­cs research complex.

CARDC, which says it has 18 wind tunnels, is heavily involved in research on hypersonic weapons, according to former U.S. officials and U.S. and Australian researcher­s. Its director, Fan Zhaolin, is a major general, but he is pictured in civilian clothes on the center’s website.

The center has been on the U.S. trade blacklist — called the “entity list”— since 1999 for contributi­ng to “the proliferat­ion of missiles.” In 2016, Commerce further tightened restrictio­ns on the facility.

CARDC, said Tai Ming Cheung, director of the University of California at San Diego’s Institute on Global Conflict and Cooperatio­n, is “a beating heart of Chinese hypersonic research and developmen­t.”

The research center and Fan did not respond to emails seeking comment.

China’s major investment­s in hypersonic­s is a major concern at the Pentagon.

“The only way to reliably see a hypersonic vehicle is from space, which makes it a challenge,” said Mark J. Lewis, until recently the Pentagon’s director of defense research and technology. If it is traveling at hypersonic speeds — going at least a mile per second — it gives a missile defense system very little time to figure out what it is and how to stop it, he said.

Hypersonic­s is a critical, emerging military technology, said Lewis, the executive director of the National Defense Industrial Associatio­n’s Emerging Technologi­es Institute. China could target Navy ships and air bases in the Pacific, he said, adding that a convention­al cruise missile would take an hour or two to reach its target while a hypersonic missile could do so in minutes.

“It is a huge concern,” he said.

A million trillion calculatio­ns

In 2014, the U.S. Air Force released an unclassifi­ed report on the technology of air warfare that included hypersonic­s. “Anyone could pick up this document,” Lewis said. “Then we basically took our foot off the gas. There was no sense of hurry, of alacrity.”

Meanwhile, the Chinese read the American research. Their scientists began showing up at U.S. conference­s. They started investing. “They saw that hypersonic­s could give them a military advantage,” Lewis said. “And they acted.”

China, unlike the United States, has fielded a hypersonic weapon: a medium-range hypersonic glide vehicle.

Hundreds to thousands of different configurat­ions of heat, vehicle lift and atmospheri­c drag need to be analyzed to make a hypersonic missile work, which would be too expensive and timeconsum­ing through physical testing alone, said Iain Boyd, director of the Center for National Security Initiative­s at the University of Colorado at Boulder. “If you didn’t have supercompu­ters it could take a decade,’’ he said.

In May 2016, CARDC unveiled a “petascale” supercompu­ter that would aid the aerodynami­c design of hypersonic missiles and other aircraft. A petascale computer can handle one trillion calculatio­ns per second.

In 2018 and 2019, CARDC scientists published papers showcasing their supercompu­ter and noting their calculatio­ns were done with Phytium’s 1500 and 2000 series chips, though the papers do not discuss research on hypersonic weapons.

CARDC, Phytium, the military university and the Tianjin supercompu­ting lab are currently developing an even faster computer — able to handle “exascale” speeds of a million trillion calculatio­ns per second. The supercompu­ter, dubbed Tianhe-3, is powered by Phytium’s 2000 series chips, according to Chinese state media.

To produce such chips, Phytium requires the newest design tools.

Although CARDC and other PLA entities are under U.S. export controls, the Chinese military is still able to access U.S. semiconduc­tor technology through companies like Phytium.

One Silicon Valley company that counts Phytium as a customer is Cadence Design Systems, which gave an award to Phytium at a 2018 conference for presenting the “best paper” on how to use its software for high-performanc­e chip applicatio­ns. Another is Synopsys, headquarte­red eight miles from Cadence in San Jose, Calif.

“I have not in my decade in China met a chip design company that isn’t using either Synopsys or Cadence,” said Stewart Randall, a consultant in Shanghai who sells electronic design automation software to top Chinese chipmakers.

Cadence did not respond to repeated requests for comment.

In an emailed statement Thursday, Synopsys said, “We continue to abide by the U.S. government entity list restrictio­ns.”

More loopholes

Phytium’s microproce­ssors are produced at gleaming factories outside Taipei by the Taiwan Semiconduc­tor Manufactur­ing Company, which now makes the world’s most advanced chips, having surpassed the United States.

TSMC, the largest of several Taiwanese chipmakers, is in the unusual position of manufactur­ing chips “that end up being used for military purposes by both the United States and China,” said Ou Si-fu, a fellow at the Institute for National Defense and Security Research, a think tank co-founded by Taiwan’s defense ministry.

The company, for instance, makes chips used in advanced American weapons, including Lockheed Martin’s F-35 fighter jet. TSMC announced last year that it would build a $12 billion factory in Arizona in response to Trump administra­tion concerns about the security of the semiconduc­tor supply chain.

“These private companies do business and don’t consider factors like national security,” Ou said, adding that Taiwan, as a small country, lacks the leverage and will to enact export bans. “The United States has a relatively complete set of export control measures and regulation­s, while Taiwan is relatively loose and has more loopholes,” Ou said.

TSMC said in an email to The Washington Post that it obeys all laws and export controls. Earlier last week, company spokeswoma­n Nina Kao said, “We are not aware of a product manufactur­ed by TSMC that was destined for military end-use as alleged in your email.”

On Thursday, Kao said the company had no comment on the Commerce Department action.

The final stage of Phytium chip design is handled by another Taiwanese company, Alchip, which deals directly with TSMC’s factories on Phytium’s behalf.

Daniel Wang, Alchip’s chief financial officer, said Phytium signed an agreement stipulatin­g its chips are not for military use. Phytium has told Alchip that its clients are civilians and that the 1500 and 2000 series chips are made specifical­ly for commercial servers and personal computers, Wang said.

However, a 2018 Alchip news release notes the firm has worked with “China’s National Supercompu­ting Center,” which had been on Commerce’s blacklist for three years at that point for involvemen­t in “nuclear explosive activities.”

Alchip did not respond to a request for comment on the Commerce listing.

Mark Li, an analyst at Sanford Bernstein, said that unless Phytium is placed under sanctions, TSMC is in no position to cut it off.

“It’s not TSMC’s job to be a policeman for the United States,” he said. “That’s for politician­s to decide. China is the biggest semiconduc­tor market. If you give that up when the business is legally allowed, you can’t explain that to shareholde­rs.”

“Containmen­t and suppressio­n by the United States cannot stop the pace of China’s scientific and technologi­cal progress. It will only strengthen China’s determinat­ion to innovate independen­tly.” Zhao Lijian, Chinese foreign ministry spokesman

Shih reported from Taipei, Taiwan. Pei Lin Wu in Taipei contribute­d to this report.

 ?? ASAHI SHIMBUN/GETTY IMAGES ??
ASAHI SHIMBUN/GETTY IMAGES
 ?? SAM YEH/AGENCE FRANCE-PRESSE/GETTY IMAGES ?? TOP: A hypersonic glide vehicle is seen in October 2019 in Beijing. On Thursday, the Biden administra­tion placed seven Chinese firms and labs involved in high-performanc­e computing on an export blacklist for developing hypersonic missiles. ABOVE: TSMC, the largest of several Taiwanese chipmakers, manufactur­es ones used for military purposes by both China and the United States.
SAM YEH/AGENCE FRANCE-PRESSE/GETTY IMAGES TOP: A hypersonic glide vehicle is seen in October 2019 in Beijing. On Thursday, the Biden administra­tion placed seven Chinese firms and labs involved in high-performanc­e computing on an export blacklist for developing hypersonic missiles. ABOVE: TSMC, the largest of several Taiwanese chipmakers, manufactur­es ones used for military purposes by both China and the United States.

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