California Firm Charged for Scheme to Export Chemicals to Chinese Military Chip Maker

July 20, 2020 Updated: July 20, 2020

Federal authorities charged the president and an employee of a California-based company on July 20 with conspiring to illegally export specialty chemicals to a Chinese state-owned manufacturer of chips used in military systems.

Tao Jiang, the CEO of Broad Tech System Inc., and Bohr Winn-Shih, the firm’s equipment engineer, allegedly conspired to illegally export specialty chemicals from a Rhode Island-backed manufacturer to China Electronics Technology Group Corporation 55th Research Institute. 

The institute, also known as NEDI, is a Chinese Communist Party (CCP)-owned enterprise that researches, develops, and produces core chips and key components for the Chinese military’s air defense systems, airborne fire control systems, manned space systems, and other national projects.

The indictment is the latest in the Trump administration’s all-of-government effort against the CCP’s large-scale effort to pilfer American technology and intellectual property. As part of the law-enforcement prong of the U.S. effort, the FBI has opened more than 2,000 investigations related to China.

“The CCP has launched an orchestrated campaign across all of its many tentacles in Chinese government and society to exploit the openness of our institutions in order to destroy them,” Attorney General William Barr said on July 16.

According to the indictment, Tao and Shih attempted to export chemicals called Photoresist and HPRD441, which are used in the manufacture of computer wafers. Photoresist is a specialty chemical that interacts with light to create pathways between chips on computer boards. 

On Oct. 25, 2018, the Customs and Border Protection National Targeting Center flagged an intended export of 58 gallons of Photoresist to NEDI. The export was halted and returned to the manufacturer.

Four days later, Jiang called the company and requested to order 94 gallons of Photoresist. In subsequent communications and follow-up orders, Jiang and Shih misled the manufacturer and a freight forwarding company about the ultimate recipient of the chemicals by claiming the shipments were meant for NTESY Technology Co.

Jiang, his company, and Shih were charged with conspiracy, conspiracy to violate the Export Control Act, and money laundering conspiracy.

Emails cited in the indictment show that Jiang and Shih were well aware of the export prohibitions to NEDI. On Aug. 1, 2018, the U.S. End-User Review Committee added NEDI to the list of entities believed to be in the business of illegally procuring goods for unauthorized military and technological use in China. On the same day, according to the indictment (pdf), Jiang emailed Shih about the designation. Shih, after calling up the relevant government agency, confirmed to Jiang that NEDI is on the list.

Two weeks later, Shih received an email informing him that a company wouldn’t provide a quote for an order since NEDI was added to the blocked entity list.

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