A bipartisan investigation by the U.S. House of Representatives Select Committee on China has found that gaps in export control coordination among the United States, Japan, and the Netherlands have allowed Chinese companies to purchase nearly $40 billion worth of advanced chipmaking equipment, despite years of Western efforts to curb Beijing’s access to critical semiconductor technology.

The report, seen by Reuters, revealed that inconsistent enforcement of export restrictions enabled non-U.S. toolmakers to sell to Chinese firms that American companies were barred from supplying. Lawmakers urged Washington and its allies to impose broader bans on chipmaking tool sales to China, rather than the current firm-specific restrictions.

According to the committee, Chinese semiconductor firms spent $38 billion in 2023 on equipment from the five leading global suppliers — Applied Materials, Lam Research, KLA, ASML, and Tokyo Electron — representing a 66% jump from 2022, when many export controls were first introduced. The purchases accounted for about 39% of total sales by the five firms last year.

U.S. officials view the semiconductor sector as central to national security, particularly as advanced chips underpin progress in artificial intelligence, defense technologies, and supercomputing. The committee warned that unchecked Chinese access to sophisticated tools risks strengthening Beijing’s capabilities in these areas.

“These are the sales that made China increasingly competitive in the manufacture of a wide range of semiconductors, with profound implications for human rights and democratic values around the world,” the report stated.

Three Chinese companies — SwaySure Technology Co, Shenzhen Pengxinxu Technology Co, and SiEn (Qingdao) Integrated Circuits Co — were identified as major buyers and potential security threats. The firms were previously flagged by lawmakers for alleged ties to a covert network supporting Huawei Technologies, prompting U.S. export bans in December.

Industry voices also acknowledged that further policy alignment is needed. Mark Dougherty, president of Tokyo Electron’s U.S. unit, told Reuters that sales to China have begun to decline this year due to newer regulations but said “more coordination” between Washington and Tokyo is essential.

“I think it’s clear, from a U.S. perspective, there’s an outcome that is still desired that has not yet been achieved,” Dougherty said.

While Applied Materials and Lam Research declined to comment, ASML and KLA said they would review the report before responding. The committee confirmed that all five companies cooperated with its investigation and were informed of the findings.

The report recommends tighter alignment of export rules among allied nations and expanded controls on components that China could repurpose to build its own chipmaking tools.

“China is attempting to rewrite the entire supply chain,” warned Craig Singleton, a senior fellow at the Foundation for Defense of Democracies. “What used to be niche tool segments are now battlegrounds.”