Homeland Security Committee Hearing On Us Tech And Russia

… come to order. Welcome to our witnesses. Thank you so much for being here. I appreciate everyone who is attending personally or virtually and also to my colleagues for being here on a very, very busy day and a busy three weeks, as you know. And I want to thank the ranking member in particular for his cooperation. We’ve worked well together and we will continue to do so, I am sure. On July 8th of this year, as anyone who has been following Ukraine will recall, a Russian Kh-101 cruise missile hit Kiev’s largest children hospital slaughtering dozens of medical staff and children, brutally injuring many. That missile was made by Russia, but the technology in it was American. It could not function, nor could many of the weapons of slaughter manufactured by the Russians be made without microchips and technology from the four companies represented here today.

(01:22)
Analog Devices, Intel and Texas Instruments. Russian bombs, missiles, and drones supported by American technologies are literally killing Ukrainians, not just Ukrainian soldiers, but civilians, women, children in their sleep, in hospitals, in schools, purposely, relentlessly. Every day millions of dollars are made by manufacturers and distributors from chips like the ones that run the Kh-101 missile and other Russian weapons. These electronics are funneled through shadowy startups and shell companies in countries like Armenia, Turkey, Kazakhstan, and others. Every day, more malign, malicious companies are added to the list of bad actors. For example, just two weeks ago, Buy Best Electronic in Istanbul, a company with an alternative address listed in China and Iran was placed on the prohibited entity list. The dollars flowing to these entities in nearby countries are many multiples of the pre-war transactions. There’s no mystery here. The number of dollars has multiplied astronomically. The four companies before us can ignore this escalating flow of electronics only through willful blindness.

(02:59)
Over my six visits to Ukraine, I’ve met amputees whose limbs were lost to weapons like the Kh-101 missile. I’ve spoken with families who’ve lost loved ones in their homes and at war, and repeatedly I’ve heard from families and officials alike with pleas to do more to stop this flow of technology, to give them the tools they need to fight back and defend themselves. Again and again, from President Zelensky whom I’ve seen on every one of those trips, from his military leaders to soldiers to everyday citizens, I’ve heard this plea to stop the flow of American technology that is enabling Russians to maim and kill Ukrainians. During my last visit, I went from room to room to room to see dozens of Russian weapons actually taken from the battlefield. And their inner parts, the chips and other electronic parts of those missiles that enabled them to target, to fly, to kill.

(04:27)
Ukrainian officials also handed me reams of documents, which I will enter into the record without objection. When I say reams, I mean several pounds. Each of these pages has multiple different examples of the inner stuff of these missiles. You’ve seen pictures of them, or witnesses have. The American people deserve to see them as well, and this is just a sample, just a sample of what Ukrainian officials, including President Zelensky, who is directly aware of these sales by American companies through distributors to these shell companies and shadowy startups. These page after page of components from the Ukrainian military were found in Russian weapons taken from the battlefield.

(05:36)
They’re not pre-sale, they’re after-sale, after-attack. And the vast majority were made by American companies, 70% by American companies of everything taken from the battlefield. But including the four companies sitting here today, over 16% were made by Analog Devices. Over 15% were made by Texas Instruments. Over 5% were made by Intel. Nearly 5% were made by AMD. These are the rough numbers. They may be off by one or two, but you get the idea. This phenomenon is undeniable. Despite two years of savage criminal aggression and two years of sanctions, American technology is still fueling Russia’s murderous war against Ukraine. The illicit flood of semiconductors into Russia is enabled by the knowing neglect or willful ignorance of American companies. It borders on intentional disregard. It’s creating a system that is more of a sieve than a barrier.

(07:06)
A year ago, we began an inquiry to understand how United States technology continues to make its way into Russian munitions. We focused on four American companies represented here today, but the reason is that their products are disproportionately found in Russian weapons. Our investigation is the first to highlight specific flaws in the compliance programs across this industry. And our conclusion applies to the industry, not just to these four companies. It is that these manufacturers are objectively and consciously failing to prevent Russia from benefiting from the use of their technology. The initial findings of our inquiry are detailed in a majority staff report. We’ve released it today. I’m sure that you’re familiar with it. The subcommittee’s findings paint a stark picture of the flow of technology to countries neighboring Russia. They also demonstrate that these companies, all of which have the resources, funding and knowledge to do more are simply not doing enough. These companies are not doing enough. And more specifically, we found continuing drastic increases in shipping of semiconductors to certain third-party countries like Kazakhstan.

(08:43)
Simply put, there’s no explanation for these increases other than to aid Russia in circumventing our export controls. We found companies’ efforts to track the of their chips into Russia to be slow, unhelpful, or nonexistent. We found failures to perform basic steps like conducting regular audits that would go a long way to keep microchips out of Russian hands. We found records showing that companies were aware of potential diversion of their chips into Russia, but only detected and blocked those sales after the federal government gave them the data that they could have easily gotten themselves.

(09:28)
Our findings reveal a distinct disinterest in evaluating and improving corporate compliance practices, and particularly monitoring those distributors, the middlemen, the ones who may actually make the sales to companies that sell to Russia. Our investigation shows that the excuses offered by companies to explain the presence of their products in Russia ring hollow. For example, these weapons cannot simply run on chips ripped out of microwaves or washing machines, but rather need specialized components made by specific manufacturers. Or these chips are not coming from stockpiles amassed before the war. Efforts to trace these weapons demonstrate that increasing quantities were manufactured after the invasion began.

(10:32)
I want to be clear to the companies who are here today and others who are out there. Your products may be tiny, but your culpability is huge. In moral and perhaps legal terms, you bear deep responsibility. Our investigation is ongoing and we are going to determine whether your failure to stop these products from reaching Russia stems from willful ignorance or perhaps something more. Let me come to today. Our inquiry has made it clear not only that these companies, but indeed the entire semiconductor industry is failing to do enough and today’s hearing really ought to be a wake-up call for the industry. Looking the other way when you know your products continue to empower Russian slaughter is not just morally dubious, it’s against the law. We expect more from American companies.

(11:31)
We know from financial industry enforcement that robust protective compliance can trace even the most interchangeable goods like cash. We also know that the problem of US technology and Russian weapons is just the tip of the iceberg. In February, we heard testimony from experts who told us that US semiconductors are found increasingly in large amounts in North Korean and Iranian weapons. And we also know that China is attempting to use our technology to fuel advances in artificial intelligence to achieve its own military goals. Both the previous and the current administration have implemented export controls to attempt to stem to China’s technological advances using our technology, but American components are still reaching our adversaries and threatening our national security.

(12:39)
None of these efforts will work if American companies fail to drastically upgrade their compliance. Perhaps as a result of this investigation, we’ve seen a few positive results. Just last week, Analog Devices informed the subcommittee that it now intends to expand its scrutiny of all of its distributors’ export controls annually and obtain an independent review of their compliance program next year. In the last few days, AMD committed to audit its entire export compliance program next year. Let me be blunt, these steps are not enough. They reflect at least a recognition of the problem and a sign of responsibility for it. There should be audits quarterly. There should be independent review regularly.

(13:45)
While the companies that manufacture these products are the first line of defense. We will also continue to examine lapses and lags in federal enforcement. We believe that there is more to be done and we plan to continue this inquiry to evaluate the entire section sanctions regime. For now, our hope is that American companies will step up. Ukraine’s security and survival are critical to our own national security. A victorious Putin is an unacceptable threat to the United States. Two years ago, the United States and its allies stood strong in support of Ukraine and vowed to stop technology flows to Russia’s war machine. Our system for halting that supply depends on you, the American companies doing much more. I hope to hear of the action that you have planned. And with that I will turn to the ranking member.

Thank you, Mr. Chairman. You are using strong language, making some pretty strong accusations, things like knowing neglect, willful ignorance, objective and consciously supplying these, the culpability is huge. I appreciate the witnesses here. I’m assuming you’ll be defending your accompanies and their actions. I think at a minimum we can say what the chairman believes is so easy to accomplish is not that easy to accomplish in a global economy where you’ve got companies that export products globally, and we want them to export products globally. This past February, the Permanent Subcommittee on Investigations held in initial hearing on Russia’s ability to obtain US produced electronic components such as microchips and semiconductors for its military equipment despite US sanctions and export controls. I noted at that time that although US producers of these components are not, as far as I know, or as my staff has determined, not violating US export controls, it appears that non-sanctioned countries, namely Armenia, Finland, Georgia, Kazakhstan and Turkey are legally … Again, as far as I know, importing the components from the US and then either directly or indirectly exporting the semiconductors to end users in Russia.

(16:18)
In that hearing, by the way, we determined that the amount of these goods being diverted is about 2% of ADI’s 2023 revenue, so not insignificant, but not a massive amount either. The reality is that Russia’s evasion of US sanctions and export controls is not a reflection of US companies failing to follow the law, but instead is one of many unintended consequences that have resulted from the Biden-Harris administration’s ineffective design and implementation of sanctions and export controls. As I described in February, despite US sanctions targeting Russia’s crude oil exports, Russia’s overcome those sanctions by selling crude oil to China and India. I also previously mentioned that without access to Western financial networks due to US and European sanctions, Russia’s dependence on the US dollar has decreased. Paving the way for China to fill the void and increase Russia’s reliance on the Chinese won.

(17:16)
With growing trade between China and Russia, which told 240 billion in 2023, the US dollar’s role as the world’s premier and primary reserve currency has weakened. With our national debt exceeding $35 trillion, this reality should concern us all. It’s a serious problem if the US loses its position as the world’s reserve currency and that’s the direction it’s heading. Far from failing, the Russian economy has defied Western sanctions, growing in an estimated 3.6% in 2023 and is expected to grow at 3.2% this year. Russia’s economic growth is directly linked to the funding and equipping its war effort against Ukraine. Indeed, reports indicate that Russia produces three times more military munitions than the US and Europe combined. Whereas Western countries reportedly spend five to $6,000 to make 155 millimeter artillery round, Russia can produce a comparable shell for $600. That says something about our military industrial complex and how it’s benefiting economically from this war. US sanctions export controls have failed to cripple Russia’s economy or deter Vladimir and Putin from continuing to wage a bloody war against Ukraine. Now, I fully support sanctions designed to deter and punish Russia’s aggression, but we must be honest with ourselves by accurately assessing the extent to which the sanctions are accomplishing their goals or causing more harm to ourselves and our allies. Trying to pin the blame for the ineffectiveness of the current sanctions regime on US manufacturers who are, again, to the best of my knowledge following the law is ignoring that point. Thank you, Mr. Chairman.

Thank you, Senator Johnson. I’m going to introduce the witnesses. And again, we thank you for being here. Michelle Stout of ADI. Michelle Stout is vice president of Global Trade Compliance and Government Affairs at Analog Devices Inc. Ms. Stout has over 30 years of experience in global trade compliance. Tiffany Scurry of AMD. She is the corporate vice president, chief compliance officer at Advanced Micro Devices Inc, AMD. Ms. Scurry has worked in roles related to compliance, IP and technology transaction for more than 20 years. Jeff Rittener of Intel. Jeff Rittener is the chief trade officer and vice president of International Trade Group, ITG at Intel Corporation. Mr. Rittener has worked at Intel for more than 30 years.

(20:08)
Shannon Thompson of Texas. Instruments is the vice president and assistant general counsel for commercial operations at that company. Ms. Thompson has worked for Texas Instruments both directly and indirectly for more than 20 years. As is our custom on the committee, I’m going to ask you to rise and be sworn in. Do you swear that the testimony that you’re about to give is the truth, the whole truth, and nothing but the truth, so help you God?

Yes.

Wonderful. Thank you again and Ms. Stout, you would please begin your testimony and we’ll go down the line.

Chairman Blumenthal, Ranking Member Johnson and members of the subcommittee, thank you for the opportunity to speak with you today. My name is Michelle Stout. I am vice president of Global Trade Compliance and Government Affairs at Analog Devices, also called ADI. We appreciate the Subcommittee’s focus on the illicit diversion of semiconductors, which we are also focused on and working very hard to prevent. ADI is headquartered in Wilmington Massachusetts, we have about 26,000 employees and sell 75,000 different products to approximately 125,000 customers. Although most of our work is focused on civilian technology, ADI is a proud partner of the US Department of Defense in its efforts to protect the United States and our allies. Our technology is incorporated into automotive and industrial automation systems, consumer electronics and advanced digital healthcare items. Our products are intended to positively impact the health of people and our planet.

(22:03)
As today’s hearing is focused on Russia’s use of US chips in its weapons systems, let me be very clear: we are horrified by Russia’s invasion of Ukraine. We have Ukrainian employees including our chief people officer and a legal team member whose father serves in the Ukrainian military. At the highest levels of ADI, ensuring that our products are used as intended is not just a legal or commercial matter, it’s personal. Diversion of our products is morally wrong and is against our company’s values and we are a leader in industry trying to stop it. Going above and beyond what is required is part of our culture and our approach to compliance is no different. We are committed to complying with export control laws in the United States and in all other countries where we operate, but we see the laws as a floor, not a ceiling. For example, when Russia invaded Ukraine, we swiftly stopped all transactions in Russia even though some were still allowed under the law.

(23:05)
As another example, some semiconductor parts are not subject to US export control because they’re deemed low tech, not subject to foreign direct product rules and do not touch US soil. US companies can legally sell those products to entities on the entity list and several do. On my fifth day at ADI, I consulted our chief legal officer, and with full support from our top leadership, including our CEO, we again went beyond what the law requires and did the right thing. We updated our policy and with just one exception, instructed our distribution channels that effective immediately, they are to stop selling products, not subject to us export control to companies on the entity list. Since Russia’s invasion of Ukraine, we have strengthened our policies, enhanced our employee training, invested in technology and established our gray market mitigation team whose entire focus is on identifying red flags. We’ve denied sales to approximately 5,000 actual and potential customers, including companies with fake websites or that we have identified as product brokers.

(24:13)
It’s important to note that not all purchasers were confirmed, bad actors and none were on the entity list when blocked. However, in line with our company values, we chose to block these lawful transactions. ADI works closely with federal government agencies including the Department of Defense, State, and Treasury, the FBI, DHS, and the intelligence community. These partnerships have been critical in strengthening our anti-diversion efforts, and there is evidence that US export controls are working as NGOs and other think tanks have reported that Russia has to resort to alternative distribution channels to circumvent sanctions and that they are paying much higher prices to import US technology.

(24:58)
Unfortunately, stopping diversion completely is nearly impossible because of the ubiquity of chips and modern economies, the sprawling global nature of chip markets and determine efforts by bad actors to circumvent regulations. That said, we know what the stakes are, which is why ADI is a leader in preventing illegal diversion. We are committed to doubling down on our efforts by continuously improving our compliance programs, increasing information sharing and strengthening our cooperation with our European and Asian allies. We also welcome collaboration with our government partners, including the subcommittee and our industry peers to advance that goal. Thank you again for holding this hearing today. I look forward to your questions.

Thanks very much, Ms. Stout. Ms. Scurry?

Chairman Blumenthal, Ranking Member Johnson, members of the subcommittee. My name is Tiffany Scurry and I am the chief compliance officer at AMD. Thank you for the opportunity to testify here today. AMD is a leader in high performance and adaptive computing. Our products help solve the world’s most important challenges and our technology is at the heart of a broad set of consumer products. I am proud to oversee AMD’s global team of highly trained experts who are responsible for managing and implementing our company-wide ethics and compliance programs.

(26:26)
Today’s hearing calls to attention and important issue: efforts of semiconductor companies and others to ensure that our products do not find their way into the wrong hands where they may be used for illicit purposes. We appreciate the subcommittee’s continued leadership on this important issue. I want to be very clear: we have no tolerance for the diversion of our products. Our commitment against selling to military end users in Russia is a longstanding one. We ceased all sales to Russia and Belarus soon after the invasion. And more broadly, we have Red Redoubled our efforts globally to prevent diversion and we are deeply committed to compliance with all export control laws.

(27:18)
Our compliance program is an enterprise-wide initiative that we developed in accordance with guidance from the US Bureau of Industry and Security. Before we make a sale, we undertake a number of protective measures designed to help us ensure that we know who we are selling to. We invest heavily in diligence efforts to look for red flags. Our systems have software controls to block prohibited parties, locations, and end uses. If we see issues of concern, we won’t complete the sale. For instance, we’ve refused to do business with newly formed companies with no web presence as well as those that may share a physical address associated with a sanctioned entity. We believe these systems are working and we continue to improve them every day. We also take strong steps after a sale occurs to prevent diversion. We require our direct customers to provide us with ongoing post-sale data of their transactions, which we also screen against sanctions lists.

(28:32)
We have long had thorough audit processes for export controls, including with distributors to verify their downstream sales. This year, we’ve amplified the export control portion of our audits to further strengthen our anti-diversion efforts. And in response to the subcommittee’s suggestion, we will also undertake an internal audit of our own export control processes in 2025. But the reality is there are no easy solutions. We face sophisticated criminal actors who are intent on subverting US and other laws in a global marketplace. There are a significant amount of components that were already legally in the stream of commerce before the invasion of Ukraine. When our teams are able to trace components found on the Ukrainian battlefield, they are often old, sometimes decades old.

(29:35)
Finally, there’s the issue of parts making their way to Russia through other countries. On this point, I want to stress that AMD’s share of direct sales in all of those countries was either zero or close to zero in the last several years. We are taking a number of other proactive steps, including launching an anti-diversion committee, centralizing

… our investigative intelligence, adding new third-party know your customer resources, and partnering with the federal Disruptive technology strike force. We also want to listen to the subcommittee’s additional ideas. We believe our efforts are having an impact, but we know the scope of the challenge is greater than any one company alone. We are committed to continued cooperation with you, the executive branch, NGOs, and other companies to stem and stop the flow of chips into Russia. Thank you again for the opportunity to share this information, and I look forward to your questions.

Thanks, Ms. Scurry. Mr. Rittener.

Chair Blumenthal, Ranking Member Johnson, and members of the subcommittee, thank you for the opportunity to appear before you today. My name is Jeff Rittener, and I am the Chief Trade Officer and general manager of the International Trade Group at Intel Corporation, where I have worked for more than 30 years on global trade issues. For more than 50 years, Intel has created world-changing technology that improves lives at home and abroad. As a proud American company and the only US semiconductor company that both develops and manufactures its own technology, we are committed to making the United States the leader in advanced chip manufacturing, which is critically important to the US technological leadership, as well as US economic and national security. This is why Intel is investing $100 billion over five years to expand our semiconductor technology development and manufacturing operations in the United States.

(31:58)
At the outset, I’d like to make clear that we condemn Russia’s war against Ukraine in the strongest possible terms. We continue to stand with the people of Ukraine and the global community in calling for an immediate end to this war and a swift return to peace. Everywhere we operate, we are committed to doing so ethically and responsibly. This includes complying with all applicable sanctions and export laws. We work tirelessly to keep our products from being diverted in violation of export controls or used in any way that it violates human rights. We hold our customers, suppliers, and other third parties to these same standards. That is why we invest extensively in our compliance programs, including our first-class sanctions and export controls compliance processes. Established over 30 years ago, Intel’s comprehensive export controls and sanctions compliance program not only meets but exceeds government standards for trade compliance. We recognize that the regulatory, technological, and risk environments are constantly changing. That is why our compliance program is a living program. We constantly work to improve and adapt, including incorporating additional tools and technology to further reduce risk. We also annually evaluate the effectiveness of our program.

(33:38)
Like others in the semiconductor industry, we do not sell directly to end customers. The vast majority of our products are sold to large manufacturers who integrate our products into everyday commercial items, such as household name, brand, laptops, phones, and other devices. A much smaller percentage of our sales are through a select group of vetted distributors who then resell our products to their customers. Such a distribution model is common across the semiconductor industry and many others. We take great care to subject all distribution partners and direct customers to extensive due diligence and vetting. We also subject all distributors and direct customers to regular audits, and we contractually require them to comply with all export controls and applicable laws. We review sales reports, and if we identify a concern, we investigate and take all necessary action up to and including termination of a customer relationship.

(34:49)
We are committed to doing our part to address the issues we’re here to discuss today. However, we recognize there will always be bad actors determined to evade our controls. It will take continued collaboration among industry, NGOs, government, and others to address this issue comprehensively. And we remain committed to working with these parties to develop solutions. Whether stopping shipments when we become aware of illicit uses or helping to hold bad actors accountable for their intentional efforts to undermine trade controls, these partnerships and collaborative efforts are integral to accomplishing our shared goals. Thank you, and I look forward to answering your questions.

Thank you. Mr. Rittener. Ms. Thompson

Chairman Blumenthal, Ranking Member Johnson… Chairman Blumenthal, Ranking Member Johnson, and members of the subcommittee, thank you for the opportunity to be here today to emphasize how seriously all of us at Texas Instruments take these issues and how committed we are to keeping chips out of the hands of bad actors and combating illicit diversion. I oversee TI’s global commercial operations legal team. I know the importance of addressing diversion risks globally and how TI addresses these challenges. I want to be very clear. TI strongly opposes the use of our chips in Russian military equipment. Any shipments of TI products into Russia are illicit and unauthorized. TI stopped selling products into Russian Belarus in February, 2022 before it was required to do so, and we work hard to prevent the illicit diversion of our parts into Russia. Every level of our company takes this matter seriously. I personally care deeply about this issue.

(36:59)
Russia’s war against Ukraine is horrific. We grieve with those impacted, and we are angry that bad actors continue to find ways to divert our chips and use them. In Russian weapons. TI designs, manufactures, tests and sells analog and embedded processing semiconductors. TI has a product portfolio of more than 80,000 different chips that serve more than 100, 000 customers, and we manufacture tens of billions of chips every year. We’ve made a dramatic shift to our business model over the last several years. 75% of TI’s revenue now comes from direct sales to customers rather than through a distribution network. Nearly every electronic device that plugs into a wall or has a battery likely uses at least one TI chip. The vast majority of TI chips perform basic electronic functions from powering an electric toothbrush to transmitting sound from a microphone. Because of this, most TI chips are subject to the lowest level of export controls, as classified by the US Department of Commerce.

(38:20)
Most important, TI devotes significant time and resources to keep chips out of the hands of bad actors. Our global trade compliance program is central to our efforts, actively and carefully monitoring the sale and shipment of our chips. Our compliance team’s work includes screening customers and orders at least three times during the ordering process. We screen, on average, more than 4 million orders per year, and we cancel thousands of orders that pose a credible concern every year. If there is evidence indicating diversion, we investigate and take action. Combating the illicit diversion of chips remains a challenge for our entire industry for several reasons. Semiconductors are everywhere. More than 1 trillion chips are sold worldwide every year. Chips last for decades and can be stockpiled for many years. Chips are often sold and resold multiple times. Bad actors can take basic chips from everyday products and use them in military applications.

(39:39)
The same inexpensive chip that helps conduct battery power and electric toothbrushes can be used in the same way in drones or UAVs, and bad actors know how to run sophisticated operations that evade export controls. Importantly, we have taken a number of steps to further strengthen our efforts. We continually obtain new information and data from multiple sources to bolster our efforts. We have heightened manual due diligence for customers and certain chips. We engage with government agencies, charge with export compliance, support law enforcement investigations into suspected evasion activities, and work collaboratively with NGOs and industry. In closing, we remain committed to keeping chips out of the hands of bad actors and combating illicit diversion. Thank you again. I look forward to your questions.

Thank you all for your testimony. We’re going to have seven minute rounds of questions, and I’m hopeful that we’ll stick to the time limits, and we’ll have a second round if my colleagues and I have additional questions. Let me just ask all of you. And I’ve listened closely and read your testimony. Do any of you deny that American chips are reaching Russians? Okay, so we have that kind of base information accepted American chips semiconductors technology are reaching the Russians and fueling their war machine. Do any of you believe that we’re doing enough to stop it? I think that response, and all of you, I think, agree that we are not doing enough. So I want to make this hearing really productive. I’d like commitments from each of you. And some of you have begun as to more you will commit to do. And I want to begin with audits. Now, I’m just a country lawyer from Connecticut. I don’t know the technology of chips. I’ve never been involved in a major American company the way you have been, but compliance with export control, in my view, requires regular audits, not just a set of practices, but a process for checking. In fact, checking by some objective means. I’m a prosecutor by career. I was the chief federal Prosecutor United States attorney in Connecticut. I was the state attorney general in Connecticut for 20 years, and I don’t think the person who’s in charge of the program should just be taken at their word. And so let me ask you Mr. Rittener because you said that Intel does regular audits. Is there an annual audit of your export compliance program every year?

Thank you for that question, Senator. We have several audits that take place of our compliance program. On an annual basis, we are part of our Ethics and compliance Oversight committee that performs a compliance effectiveness program where we are, every year, looking at how effective is our program against a number of standards.

Do you audit all your sales to distributors and to customers for compliance with export controls?

Yes. Thank you for that question. We do have an authorized distribution partner program. And as a company, we audit each of our distributors, and that audit looks at a number of things including X export controls and sanctions. In fact, we have tripled our audit capacity in the last two years. And this year, we’re hoping to reach 100 audits by the end of the year.

When was your last audit for compliance with export control, company-wide, total sales to distributors and to other customers.

These audits, senator, are ongoing, and so we have… I don’t know the exact date.

Ongoing meaning they haven’t been completed?

They have been completed.

Could you provide the committee with those audits?

I would be happy to follow up with you, yes.

So you will provide us with the results of those audits?

I will have to go back to the team and look at what that looks like, and I can then-

Well, we’ve been told that you don’t do those audits, that you don’t do regular annual audits of that entire compliance program company-wide for distributors and customers.

Yes. Senator, as I said earlier, we do audit our distributors. This year, we are almost at 100 audits. We have 40 distributors, and we do audit these on a routine basis.

And could you do those audits more frequently?

We could do them more frequently, yes.

Will you do them more frequently?

I will back to my team and look at what it would take to do those more frequently, yes.

Let me ask the same question of you, Ms. Thompson. Do you do regular audits of compliance with export controls of distributors and of your customers?

To the best of my understanding, we perform the audits, reviews, and assessments that meet the BIS guidelines for conducting an annual audit on a export compliance program, and we’ll continue to do that.

I’m sorry, what program?

Export control compliance program. And we will continue to do that.

And how often do you do those? I’m talking about total audits, every sale for compliance with export control. How often do you do those company-wide audit?

So with respect to a distributor audit, currently we do those on a risk-based approach.

So you don’t do them regularly?

We do them when a risk-based approach determines that an audit would be needed.

Will you do them regularly? Will you commit to do them quarterly?

Yes, we will commit to do distributor audits.

And will you commit to require the distributors to do audits?

At this time, we will take that under consideration and we can circle back.

Because you really… And I’m going to ask the same question of Mr. Rittener, and then since my time’s about to expire, I will follow up with others. But will you commit to ask your distributors to do audits of their sales?

At this time, we have actually moved to where 75% of our revenue is direct with customers. We work with one primary distributor who we’ve had a relationship with for 40 years. They have a robust compliance program. They have 33 billion-

But will you commit to require that distributor to do an audit of export sales, provide the results to you, and you’ll provide the results to us?

Senator, we will take that under advisement and can discuss further.

Mr. Rittener, same question. Will you require distributors to do audits?

Senator, we actually require our distributors to provide a sales out report, and that sales out report demonstrates every customer they’ve sold to. And we do audit those sales out reports on a regular basis.

My time is expired, but what I’m asking is for regular audits, third-party assessments of both your sales in compliance with export controls and of your distributors, even if it’s just one distributor or if it’s 40 distributors. I’m going to yield to the ranking member at this point.

You can use the term audit, but there’s all kinds of different levels of audits. Okay? You’re all public companies, correct? So you all have a independent external auditor, correct? Probably one of the big three. Used to be big eight when I went to college. Now, we’re down to big three, right? I would imagine export controls are part of that external audit as well, correct? Can any of you speak to that? Because that would materially impact the risks your business they’re taking, if you’re not complying with export controls, if you’re not complying with sanctions. So I’d imagine your external auditor is auditing your auditing of export controls and sanctions. Can any of you confirm that?

(49:16)
Okay. I’d be shocked if your external auditors aren’t doing that. Again, we can get down the weeds on audits and not really get anywhere. First of all, Chairman asked, so chips are being diverted. I want to know what complexity of chips, because not all chips are created equal. Somebody in the testimony talked about a lot of these chips might’ve been in the pipeline well before the Ukrainian war started. So again, we can broadly say, okay, chips are being diverted and you guys aren’t paying enough attention to this. Again, according to your testimony, it sounds like you’re spending a lot of time making sure that these things aren’t diverted. It’s not an easy process. When you’ve sold these products, they’ve been sitting in a warehouse maybe for a few years. So again, speak to me. Tell me what’s actually happening here, or else this just gets all caught up in, again, undefined terms of auditing and you’re not doing enough.

(50:18)
And trust me, I realize how intimidating this is, but I’m just asking you guys, tell us how difficult it is to ensure a hundred percent compliance with this stuff no matter how hard you try. Do I have to call on one of you? We’ll start with you, Ms. Stout.

That is a very good question, Senator Johnson and Ranking Member Johnson. And what we’ve seen discovered on the battlefield are considered dual use, not subject to the EAR or to the export controls, very low-end products.

Ms. Scurry.

Thank you, Senator. Additionally, what we have seen in partnering with NGOs who are doing important work in this area, for example, Conflict Armament Research group, who find these parts on the battlefield, is that they’re very old, at least with respect to the AMD parts that they find and come to us and ask for our help researching.

Describe very old.

Typically between five and 15 years old, sometimes more than 20 years old. We have not yet seen a part from CAR recovered that was post-sanction state.

So chips even 15 years ago were quite sophisticated and they did a lot of sophisticated things, correct? Is there anything that sophisticated in terms of how these are being used to your knowledge that would preclude the use of an older microprocessor or chip?

Not to my knowledge, Senator. And like I said, these are the chips that we are being asked to investigate and provide trace data on. They’re typically old chips.

Mr. Rittener, would you agree with that?

Yes, Senator. I would agree with Tiffany’s statement.

So to your knowledge, the Intel chips that may have been found in Russian weaponry, these would generally be older. They may have been already in the pipeline, not highly sophisticated.

Senator, the items that I have seen photos of and seen in some of the report outs are, in every case, older, five to 10 years older.

You were talking about the regular audits of your vetted distributors. Have you found violations in any of those audits?

At this point, we have not found any connection, any direct connection of our sales to items diverted to Russia.

So how do you think these things are being diverted? Are they being pulled from old products, possibly junk cars or… What is your assumption in terms of how these chips are getting into Russian made missiles?

Well, the distribution ecosystem is complex and multifaceted. And so we may sell a product to a customer who sells to another, to another, and so on. And over time, with trillions of ships in the ecosystem, they make their way. Many of these bad actors find ways to circumvent and-

Again, if they’re five to 10-year-old chips, there’s no control you can put in place right now based on a war that started in 2022.

Well, we are auditing our distributors today on our current sales and looking at-

So are you pretty fairly certain, based on the audits you performed, that current manufactured trips are probably are not being diverted? Have you seen any Currently manufactured chips have been diverted?

Senator, our audits have concluded that there’s no direct linkage between our sales and the items that are being found in Russia.

Ms. Thompson, you mentioned in your testimony, bad actors find ways. Can you describe the bad actors you’re talking about and what way have they found to divert these products?

From my understanding and our work in discussing with BIS and NGOs and reading the reports that they have done, it appears that they are able to, through these multiple sales and resales of parts that are very typical in our industry, where something starts with the manufacturer could go to someone making a very simple module that then goes to the next bigger module maker, that then goes to maybe another module in the end equipment. There are multiple stages in there, and they can produce false documents, other materials that are misleading, and then redistribute. Another point that I think is important to make is at TI, old or new parts, our parts are very basic. They are essential, just simple components in a system. Some companies need five of the same part. There can be tens, hundreds, thousands of electronic components. We manufacture tens of billions of components a year, so they are very, very commonplace. So they can be… If an order looks like it’s for a refrigerator, those parts could easily be used to perform a similar-

So one final question. My time’s… You saw that the chairman put up pictures of components when he was in Ukraine. Has anybody from the committee, committee staff shown you a component of yours and asked you, when was this manufactured? How old is this? How new is this? Do you have any way how this component, how this chip got into manufacture of a Russian armament? Has the committee done that and shown you that information to give you an opportunity to look at that? Anybody? Yeah, Ms. Scurry.

Senator, we receive requests like that from CAR frequently.

From who?

Conflict Armament Research group.

Okay.

And sometimes from investigative journalists.

Okay. Have you been able to respond? Have you found anything that’s a new chip? Have they presented you with anything they go, “Oh my God, this is a serious diversion”?

We’ve not yet found a new chip. Only older chips that predate the sanctions.

Okay. Thank you.

Senator Hassan.

Thank you. Mr. Chair, and I want to thank you and Ranking member Johnson for this hearing. Thanks to the witnesses for being here today and for cooperating with the subcommittee’s investigation. Following Vladimir Putin’s invasion of Ukraine, the US, and our allies imposed strict export controls against Russia to prevent the Russian military from acquiring advanced US technology, such as the semiconductors that are part of computer chips. I’ve been working with members of the Homeland Security Committee to improve the enforcement and effectiveness of export controls, and today’s hearing is an important step in that effort. Oversight by this subcommittee has found evidence that criminals are breaking US export controls by shipping semiconductors to Eastern Europe, Central Asia, China, and the Persian Gulf, where they are then shipped to Russia for military use.

(57:45)
And I just want to highlight something here. There are weapons systems and weapons being used in Russia that were constructed before 2022, and I’m not particularly interested in what chips are in those old weapons. What I’m interested in is that following the imposition of export controls on Russia, yearly semiconductor orders from these regions jumped two to 10 times over the previous average. So a question to each of you just quickly, and Mr. Rittener, I think you’ve already answered this, does your company track country-specific sales data? And if so, do you do this for both direct sales and from distributors who sell semiconductors on your behalf? So Ms. Stout, we’ll start with you.

Thank you for your question, Senator Hassan. We do track by sales, and what we’ve identified from the reports that have been published with the countries that have, in the KSE report as an example, we have tracked those and we are identifying them as high-risk countries where we’re established additional controls to monitor our sales activities there.

And do you monitor both your direct sales and those by your distributors?

Yes, that is correct.

Okay. And next, Ms. Scurry.

Thank you, Senator. Yes, we track our sales, both direct and through distributor or to distributors by country and region. And especially following the KSE report that identified jumps in regions of concern, these are among the jurisdictions and countries that we would consider high-risk for diversion, where we are applying enhanced diligence efforts.

Okay. And Mr. Rittener, I think you answered it, but let’s just get you on the record here.

Yes, we absolutely… We do the same. And I will go on record to say that in some of those countries, we have no business at all. We don’t sell to Armenia, Belarus, Georgia, Kyrgyzstan, Uzbekistan.

And your distributors don’t either?

No. Correct.

Okay. And Ms. Thomson,

Does your company track country-specific sales data for both your direct sales and for your distributors?

The sales of our direct sales to customers. And then with regard to our distributors, we know the distributors that we’re selling to. I would need to circle back to confirm the specifics on further tracking, but we generally rely on their export control programs and that they are gathering the data and information they need to comply with U.S export control laws.

But just to be clear, you get paid by your distributors once they sell, so you have a good idea what the distributors are selling. You don’t need them to do their separate process for you to have a good idea of what they’re selling.

We will get business information and do business reviews of that data.

Okay. So at what point does each of your companies identify demand changes as abnormal or questionable so you trigger increased due diligence by your compliance teams to ensure that the chips are not being shipped to restricted nations like Russia or China? Ms. Stout?

Our gray market mitigation team, that is their whole focus in identifying red flags. Part of their monitoring is monitoring patterns in sales as well. So this is part of their diligence.

So what I would like to do and follow up with all of you in writing is just kind of, what’s your line? How do you measure when there is a red flag, Ms. Scurry?

Thank you, Senator. We leverage technology and use a risk-based approach to look for red flags, and if we see anything of concern, we won’t make a sale.

Mr. Rittner.

Yes. As I said, we look at the sales out reports because that’s our best set of data, and if we find any suspicious activity, anything that doesn’t make sense, we take action.

Okay, and Ms. Thompson?

Yes. At TI, we have a multi-layered approach to determining where and who we can sell to. We have screening against multiple databases that we procure or that we also maintain. We are working with NGOs and BIS to help identify other parties and geographies to be concerned about. We’ve added heightened screening for customers and certain parts and we employ manual and automated screening at our disposal.

Well, I thank you for all of this. As I said, I will follow up in writing about how you quantify this because when we look at the sales data and see these huge jumps, it seems that there is additional work that your companies could do, and we obviously want to partner with you and understand how we can make sure that you are complying and doing what you need to do as partners in this approach we have to sanctions.

(01:02:56)
Mr. Rittner, I want to just close with one question to you. It’s really imperative that the US remain the world leader in the development and production of AI technologies. And at the same time, we need to be clear-minded about how this technology can be misused by our adversaries and by malicious actors such as terrorists and cyber-criminals. This year, your company Intel released new highly capable AI chips that are subject to export controls. Adversaries around the world, including China, are obviously willing to break the law to obtain your advanced chips. So how is Intel approaching compliance for your higher-end chips to ensure that you’re not allowing our adversaries to steal and develop advanced AI technology?

Senator, thank you very much for that question. To answer that, I would say that when we talk about AI chips, there’s two types. One we just recently announced, which is for the AI PC, and it is your on-premise, sort of how do you do voice search and how do you do Chat GPT. The ones I think you’re probably more concerned would be our accelerator products. And when the export rule was published in October, those products now became subject to the rule, and so we’re no longer able to ship those products to China.

Okay. Well, I thank you for that. I’ll follow up with you in writing about whether there are things that Congress can do to be helpful in this effort, and I appreciate, Mr. Chair, you letting me go over time a bit. Thank you.

Thanks, Senator Hassan. Senator Marshall.

Thank you, Mr. Chairman. Give us just a second to get our graphs up here. So the graph on my right represents data from June of 2023. So the war had been going on for about 16 months, and this is the number of times we found components from your companies in those weapons used from Russia attacking Ukraine, anywhere from 186 times for the Analog Devices, 145 for TI, Microchip’s not here, Intel 63, AMD is 62 as well. And then on my left is a supply chain from one missile January of this year. So one missile has components from 16 different companies, 14 are American based companies, and then those companies have manufacturers, of course, in different companies. And then it’s interesting that 80% of the problem appears to be imported via China. Certainly it appears that China is intimately involved in this process. I assume that every one of you still sells chips to China. What happens if you just said we’re not going to sell chips to China because they’re a bad actor? Is that just such a significant amount of your business you can’t do that, Ms. Stout?

Senator Marshall, I think that with the sales to China, there is legitimate business in China. We are horrified and this is really troubling to see these numbers on these charts, but we are doing our best to prevent the diversion, and I think with China specifically, there is legitimate business in that country.

Thank you. Ms. Scurry, it’s the same for you all that this is such a significant market, we just can’t stop selling them chips.

Thank you, Senator Marshall. Actually, America’s national security is of paramount interest and we are very careful to comply with US export controls all over the world.

I understand that, but are they a significant market? So could you just stop selling chips to China period in the game? You can’t trust them.

Well, we never sell anything to China that requires a license without first getting a license and that means extensive US government review. So we’re very careful about that.

Mr. Rittner, do you have manufacturing facilities in China?

Thank you Senator. We do not.

Ms. Thompson, do you have manufacturing facilities in China?

Yeah. Texas Instruments does have manufacturing facilities in China and across the globe.

Okay. Ms. Scurry, do you have manufacturing facilities in China?

Senator, we are a fabless chip design company.

That’s Greek to me. Do you have manufacturing facilities in China?

We don’t manufacture our own products. We partner with manufacturers who are mostly outside of China.

So you do have some that work in China.

I believe there’s a small amount in China.

Ms. Stout, do you have a presence in China?

We do, Senator. We do have a presence there and there’s probably about approximately one and a half percent of contract manufacturing that we do in China.

My next question is how do you monitor third-party distributors in China? How do you handle that situation? Mr. Rittner.

Well, first I’ll just say, Senator, China is the number two economy in the world and the sales that we make to China, the proceeds are reinvested back into the United States so that we can develop the latest and greatest semiconductors. In terms of doing business in China, we follow the same model. We have authorized distributors whom we vet before we contract with them and then we also monitor them.

Ms. Thompson, the same question. How do you handle the third-party distribution from China?

Yes. Over the last years, TI has spent tremendous effort moving from a global distribution network to 75% of our revenue coming from direct sales. All of our distributors, except for two, are based in the United States. One of them has 75% of our distribution based in the United States just outside of Denver. We have two distributors in Japan who are members of the Global Export Controls Coalition and have similar export control regimes prohibiting sales to Russia, as do the United States.

Mr. Rittner, from January to October, 2023, it’s been reported that there was $351 million of Intel components imported into Russia from January to October, 2023, $351 million of Intel components imported into Russia for use as battlefield goods. You would agree with me that that’s a true statement. Would you agree with me that that’s a failure of sanctions? How does this happen?

Well, thank you for that question, Senator. First of all, we do not sell into Russia. We stopped all shipments in sales in February of 2022. So any items that are showing up in Russia, our position would be they are coming from unaffiliated third parties.

Obviously. Yeah, you’re stating the obvious. So we failed. We’ve absolutely failed. What can Intel do to keep that from happening?

Well, we believe that it requires a collaboration with industry, with government, and with NGOs to work together to pull the information we each have so that we can build stronger compliance programs to identify where there is suspicious activities that would lead to potential diversion.

In the meanwhile, while you’re forming these committees and chatting about it, thousands, tens of thousands of innocent people are going to keep dying. I think that that’s an insufficient answer. I think you’ve had every opportunity in the world to do this. I don’t know why we continue to engage China when they continue to participate in the murder of all these innocent people. Ms. Scurry, how do you handle the third party distribution situation in China?

Thank you, Senator. We comply with US export controls all over the world, China’s no different, and for distributors. For example, we collect point of sale, so their onward sale data on a weekly basis and we screen that to make sure that we understand where all of our distributors’ onward sales are going.

And that’s working?

We believe that that is working.

Thank you. Mr. Chairman, I yield back.

Senator Hawley.

Thank you very much Mr. Chairman. Thanks for holding this hearing. Mr. Rittner, let me start with you. You’re with Intel, right?

Yes, that’s correct.

We’ve been asking questions about Russia. Let me just ask you a question or two about China if I could. Why is it that your company is investing so much in China, particularly in Chinese artificial intelligence and semiconductor startups?

Yeah, China is the second largest economy in the world. Any proceeds that we actually make in China, we reinvest back into the US so that we can contribute to US leadership.

Well, wait a minute. So you’re telling me it’s good for the United States that you are investing billions of dollars in Chinese artificial intelligence? Let me just read from a Financial Times article. Intel’s venture capital arm has emerged as one of the most active foreign investors in Chinese artificial intelligence and semiconductor startups at a time that the chip maker is receiving billions of dollars from Washington to fund a technological arms race with Beijing. Is the money that you’re getting from the United States government enabling your investment in China?

At this point, we have not received money from the United States, but the money that we’re to receive is invested entirely in the United States to grow semiconductor manufacturing.

You have 43 China-based technology startups since your venture fund was launched in the early 1990s, has invested in more than 120 Chinese groups including their data provider, Crunchbase. I’m still quoting from the FT article. You’ve continued to back fledgling Chinese companies even in the past year, even as many American companies have exited the market, the Chinese market, that is, under pressure from US authorities. It just seems strange to me that you’re spending so much money even as you’re set to receive billions of dollars. By the way, I can’t believe that you get no money from Washington D.C. I find that hard to believe. But why is it that you continue to double down on the Chinese market? I mean, is this a good thing? Is it a good thing for Intel to be investing in Chinese artificial intelligence? I mean, they’re our chief competitor.

The reason for our investment, Senator, is that there are unique characteristics, technologies that we can leverage so that we can build the greatest products here in the United States.

Well, yeah, I have no doubt that you’re able to turn a significant profit off of what you invest in China, but how that benefits, in interest to the benefit of the United States, is opaque to me, not clear to me. What about your relationship with your suppliers in Shenzhen and Uyghur forced labor? Do you condemn the forced labor that the Chinese government and its suppliers use? I think maybe your mic’s off.

I’m sorry, Senator. That particular question, I would leave that answer to the experts. I’m not an expert on that.

Well, wait a minute. You’re not an expert on whether or not there’s forced labor in China?

Correct.

Wait a minute, you’re not willing to say here today that the Chinese are exploiting the Uyghurs?

I would leave that answer to that question to the experts.

Does it take an expert to know that there’s slave labor in China, the Uyghurs are enslaved? Do you know who the Uyghurs are?

I do.

Okay. So are you willing to say that what the Chinese authorities are doing to the Uyghurs is wrong?

Sir, I am not an expert to be able to make that case.

Oh, good Lord. I can’t believe you’re saying this. And what’s alarming about this is your company did the same thing. In December, 2021, you issued a letter to your suppliers saying that the company is required to ensure our supply chain does not use any labor or source goods or services from the Shenzhen region, but then you apologize for it a week later on Chinese social media saying that that letter was only written to comply with U.S law, and now you’re telling me you don’t have a stance on it at all. Is that really your position?

Senator, I’m not in a position to make that statement.

You’re not in a position to condemn forced labor in China?

I would condemn forced labor. I’m not an expert to be able to weigh in on whether China is engaging in such actions.

You have billions of dollars of investments in China, you are investing in Chinese artificial intelligence, you are investing in Chinese semiconductors, you are making who knows how much money in China, but you won’t say that the Uyghurs being exploited is wrong? What is wrong with you people? That’s not a rhetorical question. I can’t believe I’m hearing this.

Personally, I believe that slave labor is wrong. Yes.

Personally? Well, good. Well I’m glad we’ve gotten that far. Now why is your company associating itself with it?

I’m not aware of my company’s associated with it.

I cannot believe that we are sitting here having this conversation. I cannot believe that it is not easy for you to say that Intel will have nothing to do with forced labor and what the Chinese government is doing to the Uyghurs, a religious minority who are enslaved as we sit here and speak today, I can’t believe that you won’t just clearly say, “That’s wrong. We condemn it. We will have nothing to do with it.” This is astounding.

Senator, we do not support or tolerate our products being used in forced labor, slave labor or child labor.

But you just sit here and said that you don’t have any idea if it’s really going on in China.

But I’m not an expert in that.

It doesn’t take an expert. Everybody knows that this is the truth, right? I mean, would you give me the same answer about the Holocaust? Do you have to be an expert in that to know that it was wrong and that it happened? I mean, good Lord. I just have to tell you, I can’t believe the US government give you any money if this is what you’re going to do with it and this is going to be the position of your company. Let me just ask you about one other thing while I have you here. Intel is laying off what, 15,000 workers now in this new plan that you’ve just announced or cost saving plan for 2025, how many of those 15,000 workers are Americans?

Senator, I don’t have a number at this point of who’s being laid off. I can tell you that laying off anybody is no easy decision.

You considered all other ways of cost cutting measures before you laid off the 15,000? Is that what you’re telling me?

We are facing economic headwinds and to be able to make sure the company is efficient, operating efficiently, we are going through a downsizing moment…

Did you think it was efficient to give your CEO a 45% pay increase year over year while you’re cutting 15,000 jobs? Mr, what is it? Gelsinger, I think it is. He made $11.6 million in 2022, now he’s making 17 million. Is that an efficiency?

I’m not an expert on his salary.

Well, you don’t appear to be an expert on much, but I tell you what? It should not be hard to say that American jobs are important, American national security is important and slave labor is wrong and funding slave labor in China is absolutely an atrocity. Thank you, Mr. Chairman.

Thanks. Thank you, Senator Hawley. We’ll begin a second round of questions, and I want to begin where I finished. Let me go to you Ms. Stout. The information we’ve been provided by the committee more or less similar to what we know about Intel and Texas Instruments, Analog Devices audits portions of its export compliance program. You’ve completed a one-off review of export compliance following Russia’s invasion, which identified issues, you did some corrections. Will you commit to doing regular compliance or audits? And I’m not talking about commercial audits. I know that as my friend, the senator from Wisconsin has said there are audits and there are audits. I’m talking about audits of compliance, sales to distributors and then audits of the distributors and requiring those distributors to do their own audits. Will the company commit to doing that on a regular basis?

Chairman Blumenthal, we are investing in our internal audit team. We have audited our distributors, however we are committing to…

On a quarterly basis?

On a quarterly basis, but not 100% of them. So we are committing to investing more in this area and auditing 100% of our distributors.

So you will commit to doing it?

Yes.

Thank you. Ms. Scurry, will your company commit to doing those kinds of quarterly regular audits? Our information is that AMD has no program for regular internal audits of your compliance program company wide, sales wide, and that you haven’t audited your program since the invasion, since Russia’s invasion of Ukraine. You did inform us yesterday that you intend to conduct a full audit of your programs in 2025. Will you commit to doing regular quarterly audits, compliance with export control and requiring your distributors to do the same?

Thank you, Senator. I also noticed in the report that the committee published yesterday that there was no information or very little information about our current audit process for our export control programs, so I would like to share with the committee some of the steps that we do already take. We do, for example, collect, on a weekly basis, point-of-sale data from our distributors and we screen and audit that data. We also on a weekly basis audit our deemed export logs to make sure that all of our deemed export licenses are in order.

But what is the answer to my question? I know that you submitted additional information. Some of it may not be in the report because the report was done several days ago and we heard from you yesterday, but will you commit now to doing quarterly audits, I think it’s a fairly simple question, of your distributors of their sales and requiring your distributors to do it as well?

Thank you, Senator. We have committed to performing a complete audit on our export control program in 2025. And then…

I stated that. We have limited amounts of time here. So if you have to do what your colleagues have said, take it back under consideration, I recognize you may not have authority to make the commitment, but I’m asking you whether you are willing to make that commitment now. What’s your answer?

So for distributors, I will need to take that back and discuss that with my team in terms of what cadence and what percentage that we can do on an annual basis.

So you’ll take it back. And what I’d like to ask all of you as well to do, because you probably don’t have authority to make this commitment now, but I would like you to respond, let’s say, within 30 days, will you also commit to an independent assessment of those audits? Let me, Ms. Scurry, come to this point that you made about these chips being old. Has your company sent a team to Ukraine to do as I did and go to President Zelensky and the Ukrainian Armed Forces Weapons Research Institute, that’s where the photographs were taken, where Ukrainian military personnel have these arms from the battlefield? Have you sent teams to inspect those weapons?

Thank you, Senator. We’re actually having a meeting tomorrow, a phone call with representatives from state, commerce and I believe the organization that you just mentioned from Ukraine, I believe it’s an institute with the armed forces of Ukraine, and it’s to discuss the testing of chips, whether that happens on the ground in Ukraine or maybe in an embassy in another country. That call is tomorrow. And we’ve also been invited, I believe, sometime later in September to visit an embassy in another country to view the chips.

The war has been going on for two years, export sanctions for two years. You told this committee just minutes ago that you believe that these computer chips are all old, but your company hasn’t sent a team there to inspect them. You haven’t taken steps to verify whether that information is correct. That’s just your opinion or belief.

Thank you, Senator, for the opportunity to clarify. Since the invasion, we’ve had a regular cadence of trace requests, is what conflict armament research calls them. They have sent us dozens and dozens of trace requests and they look a lot like the photographs that you held up at the beginning of the hearing. And they will ask us to use those photographs to research in our records and provide information that we have about date of manufacture and shipment and other things, and we do so. We have thought it would be more helpful if we could see the parts in person and perhaps test them. That has been complicated because of jurisdiction, but it looks like we’re making progress and now at the point where we’ll be able to have access to the devices.

So the simple answer is you’ve received a lot of trace requests, but the information to us is you haven’t responded to a lot of them, correct?

Senator, we’ve responded to every single trace request.

But you haven’t responded as to whether or not in fact they are products from your company.

Senator, we have responded to every trace request where the photograph is visible and we can read it and we can trace it, we always provide the information. Sometimes there’s products where the numbers have been scratched out or covered up. You can’t do anything with those.

And that’s the basis for your telling this committee that they’re all old parts?

Senator, we have not found one yet that we’ve been able to trace to a post-sanctions manufacturing date. What I will say is that that could absolutely happen and what we see in the KSE reporting, for example, or in the new diligence tools that are now on the market, which we have access to, and you can see in the trade data that flows are still happening into Russia, so it’s an area that we need keep an eye on.

Well, I would suggest, since my time is limited, I would suggest that you send a team there, that you inspect the weapons that the Ukrainians have. Your phone call tomorrow may lead you to take a little bit more action. I don’t mean any disrespect here, but if you are on the ground, I was there. If you talk to President Zelensky and his team, if you go to actually see them and perhaps gather firsthand, not just from trace requests. Let me ask you, Ms. Stout, Analog Devices has received 20 trace requests from just one organization since the start of the Russia-Ukraine War. Our information is that you haven’t responded to any of them.

I understand your concerns. Actually just today, had an email exchange with Mr. Damian’s leaders. We are meeting

… to … we are meeting this week actually, on Friday, to determine how we can better work together.

Well, again, I welcome your stepping up. Ms. Thompson, Texas Instruments received 100 trace requests since the start of the Russia-Ukraine war and only began to work to respond to them after the subcommittee’s February hearing. Did Texas Instruments try to trace components it had received trace requests for when you initially received them?

Yes. Since we began talking with CAR in February, we have been having very active and productive conversations. We have been trying to be as responsive as we can. You have to work through some confidentiality considerations because the tracing involves customer information, because these parts touch many different potential customers as they are sold and resold multiple times. We have always welcomed this information. It’s part of our ongoing improvement to get better and understand what is happening out there, how can we better our screening processes and who we shouldn’t sell to. But we have a very active conversation with CAR. They’ve actually expressed their appreciation for our cooperation and so in terms of responding, we are actively talking with them and working through the lists based on information we have to do the tracing.

Well again, I’m glad that you’re doing more after our hearings began. I’m not trying to be disrespectful here. We welcome you’re doing more, but there’s a lot more that you can and I think you must do, and to say that the Russians are making these hypersonic missiles, that the Iranians are making their Shahed drones, that the most modern lethal weapons slaughtering Ukrainians are being made with 16-year-old chips, hard to believe.

(01:32:18)
Mr. Rittener, Intel has not provided any sufficient detail in response to trace requests to adequately follow those weapons. On one occasion when your company was asked for its help searching the path of a chip, Intel offered a list of all its distributors, which was already available publicly online. I guess Intel couldn’t be bothered to search, which is alarming. Are you also upgrading your program to respond to trace requests?

Thank you, Senator. Yes, we have engaged with all three NGOs. We are working as we speak with one in particular on some tracing requests. In fact, on another NGO, we spoke with them this morning on the phone, so we are very active currently with these tracing requests.

I apologize. Senator Johnson, I’ll yield to you for your question.

I’ll follow up on this because I was going to ask if you’ve all received trace requests. Apparently you all have. It certainly sounds like, according to the chairman, you virtually did nothing until the subcommittee held a hearing in February. I’ll just say, is that the case, Ms. Stout?

That is correct, Senator Johnson. We have prioritized our cooperation with the U.S. government. We have been working very closely-

So the question is why’d you blow them off prior to this subcommittee looking into this? That’s a legitimate question. It’s disappointing to hear.

We will be meeting with CAR to collaborate with them and determine ways to collaborate effectively.

So you started looking at it now, but so I’ll ask the next question. Now that you are looking at the trace requests, have you identified any of your chips that are modern that would’ve been designed or manufactured after the start of the Russian invasion?

I will have to get back to you on that, sir.

Okay. Ms. Scurry, you were responding to trace requests before that, before our hearing?

Thank you, Senator. Yes. We’ve been responding to trace requests since 2022.

Have you, in those internal investigations, have you identified any chips either engineered or manufactured after the start of the Russian invasion?

Not yet, Senator.

Mr. Rittener.

Senator-

Again, you were not responding to trace requests until after this committee started looking into this thing?

Yeah, at the beginning we found the trace request difficult to understand with our selling model, but we have subsequently engaged wholeheartedly with all three and we’re working, as I said, ongoing-

But again, subsequently after this committee started looking in and asking questions?

Yes.

Prior to that, you literally weren’t looking into trace requests or doing anything on them?

As soon as we had an opportunity to work with the NGO, we began to look at tracing requests.

So when was that?

I’m not familiar with the exact time.

Prior to our subcommittee investigation?

I’m not aware of the time. I’d have to go back-

Okay, I’d like to know that.

Sure.

So now having done some trace requests or looked into them, have you seen any Intel chips that are produced or designed after the invasion of the Russian?

Yeah, we have looked extensively at a number of these tracing requests and we have not found any that were-

Okay. Ms. Thompson. When did you start responding to trace requests?

Historically, TI has always welcomed outside information from NGOs and others and for years before this event, we always look at reports and see what information they have. Often it’s information given to us. It doesn’t require a conversation. The trace report exercise is something we are now working on very actively as we evolve our thinking in the partnerships and the cooperation that it takes to just disrupt the flow of products to Russia. TI takes this extremely seriously and is using-

So again, since you’ve been looking at this, have you identified any TI products that were either designed or manufactured after the invasion of Ukraine?

My understanding is that many of the chips that we were able to trace based on enough information that we received were older chips.

Okay, I’ll just conclude. I’m a private sector guy. You guys obviously didn’t invade Ukraine, but you’re public companies, you export products, you understand your exporting technology. You need to be concerned, as we’re concerned, about exporting technology that can be beneficial to our adversaries or our allies’ adversaries. So again, my assumption is within your external audit, as one of their audit areas, is they’re going to be looking at your compliance with all government regulations including export controls. Okay? Again, I’d say it’s disappointing that you weren’t proactively responding to these trace requests, but again, this is an added cost on your business, trying to enforce sanctions that I would say are pretty difficult to enforce. I mean, I’m sympathetic with the fact that you’ve got supply chains, you have old parts out there that can be taken out of old products, that can be taken out of old distributions.

(01:38:20)
My suggestion is try and comply with those trace requests. If you see modern products, obviously hop on that, but try and develop how is this happening? What can you do further? But I’m a little concerned about this committee just bludgeoning you into some audit schedule that is not going to be particularly effective either. So again, there’s a lot more detail that’s required here. I think there’s greater need for sensitivity in terms of the difficult nature of what is trying to be accomplished here. Again, I just take a different view on the Ukraine war in total. We need to end it. Every day that goes by, more of Ukraine gets destroyed, more Ukrainian soldiers die, more Russian conscripts die. Take no joy in that. This war never should have started. I think this war could have ended pretty early with negotiations and we ought to be focusing on that rather than beating up on private sector companies that have a pretty difficult task that they didn’t seek. But that’ll be my final comment. Thank you.

Thanks, Mr. Ranking Member Senator Johnson. I hope nobody here feels bludgeoned. Mr. Rittener.

Can I make a clarification based on the exchange I had with Senator Hawley? I want to clarify that there are certain inaccuracies in the Foreign Financial Times article cited by Senator Hawley. We, Intel, do not fund slave labor or Chinese AI. I just want to make sure that’s clear. And also the CHIPS Act prohibits use of funds in China.

Thank you for the clarification. As I was saying, I welcome your commitment to regular quarterly audits. Ms. Stout, I welcome your willingness to the other three witnesses to go back to your companies and consider the requests or suggestions that I have made. And let’s be real about these trace requests. They’re requests, right? They’re requests from NGOs, non-governmental organizations, who send their people out to Ukraine to look at these weapons that are recovered from the battlefield and then go to you with requests to trace your products. How were they sold? To which distributor? How did they get into Russia’s hands to make these weapons of death? Not your initiative. You get these requests. What I would like to see from you is some initiative, and I’ll give you an example. Ukrainian authorities gave me 900 pages of documents. They told me these are new chips. They are new electronics, they are new technology. The Russians aren’t relying on 15-year-old chips to make their most modern, most lethal hypersonic missiles, for example.

(01:41:44)
So I recently entered into the record these documents identified nearly 2,500 components, including semiconductors, taken from these weapons. The vast majority of them, 73%, are from American companies. We’ve identified 1,005, 40%, come from your companies. I would like you to look at these documents. I would like you to send teams there so you’re not just giving me your belief and opinion based on a few of these trace requests, so that you’re actually looking for evidence of the problem. That’s why I’m asking you also to do the audit. And I say this with great respect. I know you’re big companies, this issue is complex. The markets are fast changing, but so are the financial markets and the banks are committed to doing this kind of oversight regularly.

(01:42:52)
So let me ask each of you, will you commit to reviewing this information, and more, going to Ukraine, doing the research, which includes the detailed pictures of the chips, to following up with my subcommittee within 60 days with all the relevant identifying information in your company’s records? Let me ask you, Ms. Stout, and then go down the line.

Respectfully, Chairman Blumenthal, that is something that I would have to ask the team and get back to you.

Ms. Scurry?

Thank you, Senator. We will commit to looking at those records that you … the photos that you put in the record of the products and doing the trace requests on those. As for sending somebody into the field, that’s something that we’re actively working on. I can’t commit to that as I sit here today.

You’re actively working on it?

Correct.

And by the way, you may not be able to make the analysis from just those photographs. You may have to go see the stuff that we’ve seen, right? I mean, you can send people there.

That’s what we’re working on, sending people somewhere and meeting the Ukrainians that have the devices so that we can see them and test them.

Mr. Rittener?

Thank you. Thank you, Senator. We recognize the importance of this and I can commit that we will take a look at the information that you’ve described and I will take back the request to go to Ukraine to the team.

Ms. Thompson?

Texas Instruments will also take your recommendation under review and we will take it back to our teams. We take this issue very seriously and where there are places that we can help disrupt the flow, we want to take those efforts, as we are constantly working to improve, evolve, meet the new challenges of today and, again, help disrupt this flow.

Well, I welcome your commitments to continue trying to do more. This invasion by Russia happened two years ago, and I would’ve hoped that these efforts were done earlier. Let me ask you, one of the experts who testified at our subcommittee’s February hearing explained that his organization found a North Korean missile in Ukraine containing a majority of U.S. components, which suggests that North Korea and Iran, because we also have seen the Shahed drones, use the global semiconductor market to evade restrictions in a manner similar to Russia. Would you agree with me, Mr. Rittener, that it’s important for a weapons manufacturer to make sure its products don’t end up in Iran or North Korea?

Yes.

And if your products are necessary for weapons to operate, isn’t it equally crucial for you to make sure that your components don’t end up in their hands?

Yes, I would agree.

Ms. Thompson, would it be fair to say that the particulars may vary, but compliance processes that prevent the diversion of chips to Russia are the same as are used to stop chips from going to North Korea or Iran?

Yes. The same strong, robust compliance programs that are working to prevent getting chips to Russia would be the same screening databases efforts that we would use for any other countries in that way.

So if they’re not stopping the chips going to Russia, probably they’re not stopping those chips from going to Iran and North Korea. Correct?

So diversion will happen when there are sanctions. The bad actors will figure out schemes to do that. So where we come into play is working with NGOs, government agencies, law enforcement to understand those pathways so that we can constantly adjust and make improvements to take advantage of technology updates, things in our screening and diligence processes to make sure that we are doing our part to keep TI chips from getting into the hands of bad actors.

The Bureau of Industry and Security, you all know what the BIS is, commits to review and help companies improve their compliance programs on a voluntary basis. But only four … my understanding is four semiconductor companies have taken them up on this opportunity since the beginning of the war in Ukraine. My information is that none of you have done so. Is that correct? Ms. Thompson?

Yeah. TI works regularly with this. We’ve had a robust program in place for a while and we’re in ongoing conversations about program aspects. And so at this time, feel very strong about our program, but take your recommendation into advisement, knowing that that is a resource. We have a scaled global trade compliance staff. We’ve added headcount, and so at this time-

Will your company commit to undertaking a review with BIS?

We will take that under advisement.

Mr. Rittener?

Yeah. Thank you, Senator. We work with BIS all the time.

I know you do all the time. I’m talking about this specific program where they dig into your compliance program with you, cooperating, helping you improve compliance.

Yeah, I would absolutely commit to that as long as I understand what they’re looking for.

Okay. Ms. Scurry?

Thank you, Senator. My understanding is that this program is one where a company can submit their … what we would call an internal compliance program for BIS to review and offer comment. I would like to point out that AMD has a history of submitting a portion of it, a significant portion, called the Technology Control Plan Portion of its ICP to BIS with every deemed export license that we file. But we will also look at the committee’s consideration to submit the entire ICP as well to BIS.

So is that a yes?

Yes. We will take that back to consider if that’s something that we can do.

You’ll take it under consideration?

Correct.

Ms. Stout?

Thank you. Chairman. We were not aware of this service before reading your report, but now that we are, we will be glad to talk to BIS about our controls. And if I may, Chairman, I’d like to clarify something if that’s okay. Earlier when you were talking about the audits, what I wanted to communicate is that we are investing into our internal audit team for 100% audit of our distributors annually, sir.

Thank you. Let me ask the representatives from Texas Instruments, AMD, and Intel, I understand that shareholder representatives have asked your companies to undertake this type of third party assessment of compliance and due diligence that now Analog Devices has agreed to and Texas Instruments previously refused. Are you aware of whether your company has opposed requests for shareholder votes? Ms. Scurry?

Senator, I don’t have that information with me. I’m not sure.

Mr. Rittener?

Senator, likewise, I do not have that.

Ms. Thompson?

Yeah. Texas Instruments did receive a shareholder request for a third party report on its export control compliance program. I did want to add that our program was developed and operates in accordance with BIS guidance. So wanted to make sure that was clear. When we reviewed the proposal … we already have a very robust program with multiple layers of screens and databases and technology and cooperations with government agencies and partnerships, so rather than distract our global trade compliance team who needs to be on the front lines fighting this fight, disrupting the flow to Russia that we are very angry about at this moment, we have provided information to those shareholders. We’ve had cooperative and cordial conversations with them to explain our processes, what we do. And when it was put up for a vote, we had a vast majority, at least … I think it was 80% vote that that was-

And your board recommended against approving it, correct?

We recommended that because it was our belief that we do have a strong program in place-

And there’s no need for a third party assessment?

At this time, we believe that our program is robust and we do our own internal reviews, assessments. We have discussions with BIS. It was developed and is operated in accordance with BIS guidelines and so did not feel it was necessary and would be a distraction to the very teams that need to be working on trace requests and other important projects to stop the flow of TI parts to Russia.

Well, again, with all humility and respect, I would suggest that a third party assessment might be useful if you really want to upgrade the performance of that system. And I think we’ve all agreed that whatever you’re doing, there is more that could and should be done. Correct?

We are always working to improve. Our program is not static. For years, we are incrementally looking to see what’s changing, what we need to address, what new technologies and analytics we can use. So we agree this is a program that is constantly moving forward, constantly facing the challenges at hand and working to find solutions and partnerships and cooperations and industry best practices and recommendations from the committee, as you all have much information as well. We are taking that all into account in our program.

I’m going to close the hearing. I hope that your companies will cooperate with us, that you’ll provide the answers to the questions that you’ve taken under advisement within 30 days. But more importantly, I hope that you will take additional action. Because my hope is that you are sincere in wanting to do better, and I think the consensus from the very start of my questions, it was one of my first questions, is you can do better. And when I say you can do better, I believe as an American citizen, you must do better. Because I am ashamed and embarrassed to go to Ukraine and meet with President Zelenskyy and have him personally hand me these documents and for me to personally see the weapons of war, lethal weapons, that are crippling children and destroying lives. I know that’s not your intention, but I do think you can do more. And responding to trace requests, now that you’re doing it, is not enough.

(01:56:45)
I think you need to determine as companies that you can crack down and you will crack down through regular quarterly audits, through other measures that perhaps we will suggest as well, because we’re not done. And by the way, the United States government is not without some responsibility here. It needs to be doing a better job. I alluded to it in my opening statement and we’re going to continue our inquiry, because I believe we owe it to ourselves as a nation to hold our head high and say we’re doing everything we possibly can in a complex and difficult market, in a challenging world, to stop our adversaries, not just Russia, but Iran and North Korea and yes, China, from having access to the electronics, the technology, the semiconductors and chips that enable them to put us, the United States, at risk. Not only Ukraine, but our national security.

(01:57:58)
Senator Johnson?

I’ve got nothing.

Thank you all for being here today. This hearing is adjourned.