The report called for a review of American export-control policy, which it said had been aimed at keeping China two generations behind American industry in semiconductor manufacturing. It quoted an unidentified senior official of the Defense Department as saying that China's advancing chip industry "will have direct application in future military systems," including advanced radar used to track missiles.
To control the dissemination of such technology, the US is a member of the Wassenaar Arrangement, an information-sharing forum that was created in 1996 to succeed the Coordinating Committee for Multilateral Export Controls. The forum's 33 participating countries agree to maintain export controls on a long list of technology and to notify the group of any sales.
But the Wassenaar Arrangement does not have the binding status of a treaty, and each country is free to decide what it will export.
"Think how bad the Japanese economy is," said Nasa Tsai, president of Grace Semiconductor. "They love to sell."
The US, for that matter, also approves most equipment sales. But it can take six months or more for American companies to secure an export license. By that time, many have lost the sale.
Last year, Semiconductor Manu-facturing International dropped plans to buy a piece of sophisticated equipment from a California company after waiting months for the US to issue a license. It placed a multimillion-dollar order with a Swedish company instead.
"We love to do business with the US, but we can't wait forever," Xie said. "Europe and Japan are getting the business."
China's semiconductor industry consisted of a handful of relatively primitive plants just a few years ago, but it has grown quickly as manufacturers shift operations here to feed the fastest-growing computer chip market in the world.
A multinational industry association, Semiconductor Equipment and Materials International, predicts that China will be the world's second-biggest consumer of computer chips by 2010, behind only the US.
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