The House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party found that China now accounts for 39 percent of total revenue for the five leading "toolmakers" -- the specialized, highly complex machines needed to produce computer chips.

The report mentioned US companies Applied Materials, KLA Corporation and Lam Research, but said ASML of the Netherlands and Japan's Tokyo Electron had substantially increased sales to restricted Chinese entities as Washington imposed stricter controls on American companies' exports.

The investigation revealed that five Chinese companies restricted by Washington for their military ties were among the top 30 customers of all five equipment manufacturers between 2022 and 2024.

These included Semiconductor Manufacturing International Corporation (SMIC), China's largest chipmaker, and Yangtze Memory Technologies (YMTC).

"The Toolmakers are selling the forges of future weapons and surveillance tools to the very companies that seek to build (China's) semiconductor industry into a dominant force," the report said.

The supply from the five companies is crucial to China's efforts to ramp up its chip industry to beat restrictions imposed by Washington as Beijing looks to keep up in the race towards state-of-the-art AI technology.

The report said ASML sold 70 percent of its advanced DUV immersion lithography systems to China in 2024, up from 26 percent in 2022. These machines are critical for producing sophisticated semiconductors used in artificial intelligence and military applications.

"China is striving with all its might to build a domestic, self-sufficient semiconductor manufacturing industry," the report warned, noting the technology could be used for military projects threatening the US.

The committee recommended dramatically expanding export controls to cover all semiconductor manufacturing equipment capable of producing advanced chips destined for China, not just specific components or products.

It also called for better alignment of export controls among US allies, particularly the Netherlands and Japan, warning that the current patchwork system creates an "unlevel playing field" where foreign companies can sell equipment that American firms cannot.