A Northern California technology firm's subsidiary sold electronics to a Chinese defense firm linked to the country's spy balloon program, NBC News reported.
AXT Inc.'s filing to the Securities and Exchange Commission in August showed that it owns an 85% stake in a Chinese subsidiary that produces materials for semiconductors and supplies a giant state-owned defense firm linked to Beijing's surveillance balloon program, NBC News reported.
Last month, the Biden administration blacklisted six Chinese companies after a spy balloon was shot down after floating across the U.S.
A division of the defense firm, China Electronics Technology Group Corp. (CETC), was among the Chinese companies blacklisted for providing "support" to the People's Liberation Army's aerospace programs, NBC News reported.
CETC last year was ranked No. 233 in Fortune magazine's top 500 global companies.
At least 20 of CETC's subsidiaries and divisions have been added to the blacklist since 2018.
The list identifies foreign firms judged to pose risks to U.S. national security and imposes severe restrictions on U.S. companies seeking licenses to export goods to them.
NBC News reported it's not clear is AXT's subsidiary sold materials directly to any of the blacklisted parts of CETC.
Although there's no indication AXT, formerly known as American Xtal Technology Inc., is violating any U.S. laws, the company's previously unreported ties to the Chinese defense firm highlight the challenge of preventing U.S. technology from ending up in the hands of Chinese communists' military.
"The two economies are very intertwined in a way that others are not right now," Emily Benson, a senior fellow at the Center for Strategic and International Studies, told NBC News.
"And so the more intertwined you are necessarily means the more complex it is to promulgate controls and really to force the separation in a bilateral supply chain."
CETC is one of China's "core" state-owned defense companies, with a vast global network, said Emily de La Bruyère, a senior fellow at the Foundation for Defense of Democracies.
"It's a huge entity," she told NBC News. "One of the ways it operates is through this enormous network of subsidiaries, whether those are large research institutes or joint ventures or investment players or wholly owned subsidiaries. And those have huge numbers of partnerships in the international system."
NBC News reported that the Commerce Department didn't elaborate on the role of CETC in China's alleged balloon surveillance activities. A department spokesperson said an analysis of recovered debris from the downed balloon "is ongoing, and we do not have definitive analysis at this time."