In the race for AI dominance, the United States has used export controls on advanced semiconductors to build a formidable compute advantage over China. The strategy has proven effective to date, growing America’s share of global AI compute to roughly 75 percent against China’s 15 percent, despite leakage from smuggling. This gap is likely to continue to widen as next-generation chips come online, given that Chinese companies collectively control only around 5 percent of the cumulative computing power of leading AI chips sold in recent years.
Yet there is a structural flaw in the current strategy over the long term: it has not stemmed the flow of manufacturing equipment necessary for producing such semiconductors to China. To be clear, American companies are already restricted from selling or servicing semiconductor manufacturing equipment (SME) to Chinese fabs. However, their Dutch and Japanese counterparts often do not face the same restrictions, allowing Chinese manufacturers to buy from them instead.
The MATCH Act, introduced April 2 by Rep. Michael Baumgartner (R-WA) with bipartisan House and Senate cosponsors, is designed to fix that loophole. For now, China cannot build cutting-edge AI chips without specialized equipment that it cannot itself produce. Control that equipment, and you control the critical input to China's AI trajectory.
Gaps in the Current Approach
Advanced semiconductors require extraordinarily precise equipment: machines that etch features measured in nanometers using extreme ultraviolet (EUV) or deep ultraviolet (DUV) light. No country of concern, including China, currently produces these tools at scale. That makes the equipment itself the most relevant chokepoint.
The Biden administration's October 2022 export controls on SME were necessary but not sufficient. They took an entity-based approach (restricting specific companies) and applied primarily to U.S.-origin equipment. Both limitations have proven costly. Entity-based gaps allow Chinese firms to use front companies to route purchases around sanctioned entities. Consequently, regulators have found themselves playing whack-a-mole with an increasingly elaborate corporate ecosystem designed to evade restrictions.
Allied asymmetry is an even more significant problem. Both the Netherlands—home to ASML, the world’s sole producer of EUV lithography machines—and Japan host critical chipmaking-equipment firms. SME constitutes the largest Dutch export to China and the second-largest Japanese export, but these countries’ domestic controls lag significantly behind those of the U.S. There was, for instance, a 9-to-11-month gap between the initial U.S. controls announced in October 2022 and allied implementation in mid-to-late 2023.
The biggest remaining gaps are downstream of differences in legal architecture. Japan’s 2023 controls were framed as a license requirement for all destinations rather than an embargo, in contrast with the U.S.’s “presumption of denial” stance on exports to China. The Dutch framework is likewise an authorization system with case-by-case review, not a U.S.-style blanket prohibition. Combined with other legal quirks, Dutch and Japanese firms can thus still export some items and services to China that U.S. firms cannot. Critically, this includes older but still powerful DUV tools and maintenance services that are central to China’s indigenization efforts.
Staggered allied controls and legal incongruences risk a “worst of both worlds” scenario in which Chinese firms are still able to access critical SME tools and components while American companies are undercut by allied competitors. Clearly, this is an issue of both fairness to American firms and of the effectiveness of SME export controls. If one supplier exits the market while another expands into the gap, the strategic effect of SME controls becomes only as strong as its weakest link. Previous efforts show that this is true even when our allies adopt similar controls but with a significant time lag, giving China a window of opportunity to stockpile equipment in the interim.
What the MATCH Act Does
The MATCH Act aims to solve the allied symmetry problem in SME controls through three main mechanisms.
1. Country-wide prohibition on chokepoint tools. Rather than restricting specific entities, the MATCH Act applies countrywide controls on covered SME, prohibiting sales to any destination within a country of concern. This collapses the front-company evasion problem: it doesn't matter what shell-corporation structure a Chinese fab uses if the sale to China itself is prohibited. The bill specifies minimum coverage, including DUV immersion lithography machines.
2. Tighter restrictions on China's national champions. The bill designates all facilities run by CXMT, Hua Hong, Huawei, SMIC, and YMTC—including subsidiaries and affiliates—as covered facilities subject to restrictions equivalent to those on the Entity List. Critically, this covers post-sale servicing as well: calibration, software updates, field support, and technical assistance. Servicing loopholes matter because high-precision maintenance is what allows such equipment to keep running.
3. A diplomatic deadline with automatic escalation. Commerce and State must immediately engage allied governments and certify within 150 days either that allies have adopted equivalent controls, or that diplomacy has been exhausted and further delay would materially undermine U.S. national security. If allies have not aligned in time, the bill directs Commerce to instead institute restrictions using the Foreign Direct Product Rule (FDPR): a regulation that extends U.S. jurisdiction to cover any foreign-made equipment incorporating U.S. software, technology, or components. This encompasses the vast majority of allied producers. Before falling back on the FDPR, a 90-day waiver is available if negotiations are genuinely progressing, requiring joint certification from Commerce, State, Defense, and Energy.
Why This Approach Changes the Game
The shift from entity-based to country-wide controls puts an end to export control whack-a-mole. Existing entity-based restrictions allow Chinese buyers to evade restrictions through fronts and corporate restructuring. Country-wide controls eliminate that evasion game at the source.
The diplomacy-first structure is also an innovation. The bill charts an escalation scheme for achieving allied harmonization and creates consequences for delay. As a statutory requirement, the MATCH Act thus ensures that escalation to unilateral export controls through the FDPR is a credible commitment, galvanizing our allies out of complacency into action.
China's semiconductor indigenization effort is serious but still far behind the frontier. Huawei is reported to be producing 750,000 Ascend 950PRs this year, for example, which is less than 1 percent of U.S.-designed chip production after adjusting for quality. Nevertheless, Huawei's emergence as a leading AI chip designer, SMIC's progress towards sub-7nm nodes, and CXMT's rapid growth in high-bandwidth memory all demonstrate that the current export control regime is not getting the job done. As China climbs the semiconductor learning curve, strengthening allied alignment on SME controls has thus only become more urgent.
