The United States is escalating efforts to curb China’s access to advanced technology, with lawmakers seeking tighter restrictions on semiconductor manufacturing while the Pentagon broadens its list of Chinese companies deemed connected to Beijing’s military apparatus.
The twin developments highlight how national security concerns continue to shape Washington’s technology and trade policies toward China, even as both countries attempt to stabilize broader economic relations following recent summit between President Donald Trump and Chinese President Xi Jinping.
The latest push is buoyed by growing concern in Washington that existing export controls may still leave avenues for Chinese firms to obtain advanced artificial intelligence chips and computing capabilities through overseas subsidiaries or third-party arrangements.
Register for Tekedia Mini-MBA edition 20 (June 8 – Sept 5, 2026).
Register for Tekedia AI in Business Masterclass.
Join Tekedia Capital Syndicate and co-invest in great global startups.
Register for Tekedia AI Lab.
A bipartisan pair of senators, Republican Jim Banks and Democrat Andy Kim, has urged the Trump administration to tighten regulations governing contract chip manufacturers such as Taiwan Semiconductor Manufacturing Company. Their concern is that Chinese companies could potentially circumvent existing restrictions by using overseas affiliates or intermediary entities to commission advanced AI chips.
The lawmakers’ intervention follows recent guidance from the U.S. Commerce Department’s Bureau of Industry and Security (BIS), which clarified that exports of advanced semiconductors to overseas subsidiaries of Chinese companies require licenses. The clarification addressed concerns that emerged after Washington stepped back from enforcing certain global chip access rules introduced under the previous administration.
However, export-control specialists argue that another vulnerability remains. Chinese firms could potentially use front companies or intermediaries to order custom-designed chips from leading foundries, including TSMC, without directly violating existing restrictions.
In their letter to BIS chief Jeffrey Kessler, the senators warned that failing to close such gaps could undermine the effectiveness of broader U.S. technology controls.
“Should this gap remain unaddressed, ?it would substantially undermine every other restriction the United ?States has ?imposed on the (China’s) access to advanced placed computing capability,” the senators wrote. “Export controls that can be circumvented through fabrication orders at the world’s most advanced foundry ?offer ?no meaningful protection to American national security or ?to the competitiveness of United States industry.”
The issue bears heavy weight because TSMC remains the world’s most advanced contract chip manufacturer and plays a critical role in producing cutting-edge semiconductors used in artificial intelligence systems, data centers, military applications, and advanced computing.
Pentagon widens scrutiny of Chinese technology firms
The lawmakers are pushing the concern as the Pentagon significantly expands its list of companies it considers affiliated with China’s military or defense-industrial ecosystem.
Among the most prominent additions are Chinese technology giants Alibaba Group and Baidu, alongside electric vehicle manufacturer BYD. The updated “1260H list” also includes several firms operating in strategically important sectors such as semiconductors, biotechnology, robotics, and advanced manufacturing.
While inclusion on the list does not trigger direct sanctions, it carries important consequences. The U.S. Department of Defense will be prohibited from contracting directly with listed companies beginning later this month. Restrictions will expand further in June 2027, when procurement through third parties will also be barred.
Analysts note that these indirect restrictions can have meaningful commercial implications because defense contractors and suppliers often adjust procurement practices to avoid compliance risks.
“These indirect restrictions could force some U.S. firms that work with the U.S. military to drop designated Chinese firms as suppliers,” said Michael Hirson, head of China Research at 22V Research.
The Pentagon’s move bolsters a broader U.S. view that China’s civilian technology sector and military modernization efforts are increasingly interconnected through Beijing’s “military-civil fusion” strategy.
The expanded list now stretches across a wide spectrum of industries, from internet platforms and electric vehicles to biotechnology and robotics. New additions include memory-chip manufacturers CXMT and YMTC, biotech company WuXi AppTec, lidar producer RoboSense Technology, and robotics manufacturer Unitree Robotics.
The inclusion of Unitree is notable because the company has attracted international attention for its humanoid robotics technology and recently announced collaborations involving AI research initiatives.
Chinese firms push back
Several companies named on the list have strongly rejected the Pentagon’s characterization. Alibaba said there was no basis for its designation and argued that it is neither a military company nor part of any military-civil fusion initiative. The company indicated it would pursue all available legal avenues to challenge the decision.
“There’s no basis to conclude that Alibaba should be placed on the Section 1260H List. Alibaba is not a Chinese military company nor part of any military-civil fusion strategy. We will take all available legal action against attempts to misrepresent our company,” the company said in a statement to CNBC.
Baidu similarly rejected the designation and pledged to seek removal from the list.
Electric vehicle maker NIO, another newly listed company, said the procurement restrictions would not materially affect its business operations but that it would engage with U.S. authorities to contest the designation.
Their responses are not without precedent. Chinese smartphone manufacturer Xiaomi successfully challenged a previous Pentagon designation in a U.S. court and secured its removal from the list in 2021.
China’s Foreign Ministry also criticized the latest actions, accusing Washington of using national security concerns as a pretext to discriminate against Chinese companies and pledging to protect the interests of affected firms.