The Chip Packaging IP That Export Controls Cannot Reach
Executive Summary:
- Semiconductor packaging giant Tongfu Microelectronics holds a permanent, royalty-free license to intellectual property from U.S. fabless manufacturer AMD. This license was granted in 2016 with PRC state backing from the National Integrated Circuit Industry Investment Fund.
- U.S. export controls on semiconductor packaging, introduced in 2025, cannot reach technology permanently transferred by contract nine years earlier.
- The license permits the use of AMD’s technology for any customer at facilities in Suzhou, Zhejiang, and Penang, Malaysia, with no expiration, and survives termination of all other agreements.
During the Two Sessions on March 5, Science and Technology Minister Yin Hejun (阴和俊) repeated a claim made by both General Secretary Xi Jinping in his new year’s speech and by Premier Li Qiang (李强) in his government work report that the country’s chip development “has achieved new breakthroughs” (取得新突破) (Xinhua, December 31, 2025, March 5; S&T Daily, March 5). None stated where the breakthroughs had come, but a securities industry report published the same week identified packaging capacity, not fabrication, as the binding constraint on the deployment of artificial intelligence chips, arguing that “advanced packaging and testing will determine the upper limit of computing power supply” (先进封测将决定算力供给上限) (Fxbaogao, March 5).
Days later, Tongfu Microelectronics (通富微电子), one of the largest semiconductor packaging companies in the People’s Republic of China (PRC), confirmed on the Shenzhen Stock Exchange investor platform that it is “actively deploying Chiplet, 2D+, and other top-tier packaging technologies” (积极布局Chiplet、2D+等顶尖封装技术) (Weibo/Stockstar, March 12). The foundation for that deployment is a permanent, irrevocable, royalty-free license to access intellectual property from AMD, one of the largest U.S. fabless semiconductor manufacturers. Tongfu heralded the deal as one that was not just good for the firm itself but was “even more so an embodiment of national strategy and will” (更是国家战略和意志的体现) (Tongfu Micoelectronics, May 3, 2016). The license permits the use of AMD’s technology for any customer, at two facilities in Suzhou and Penang, with no expiration and no equity threshold.
As a result, Tongfu is beyond the reach of the current U.S. regulatory regime. The U.S. Bureau of Industry and Security (BIS) only released a whitelist of outsourced semiconductor assembly and test (OSAT) companies approved for handling advanced chips in early 2025 (Federal Register, accessed April 6). [1] As these controls are designed for the flow of items, they cannot address technology that has already been permanently transferred by contract.
Transaction Preceded Regulatory Focus on OSAT
In April 2016, AMD sold 85 percent of its only two semiconductor packaging facilities to affiliates of Tongfu for approximately $371 million. The buyer was backed by the PRC’s National Integrated Circuit Industry Investment Fund (国家集成电路产业投资基金), also known as the “Big Fund” (大基金), which provided roughly three quarters of the total acquisition capital through two purpose-built investment vehicles (Cninfo, December 28, 2016). [2] AMD retained 15 percent. The Committee on Foreign Investment in the United States (CFIUS) did not conduct a review of the transaction, as it was classified as a routine restructuring from integrated device manufacturer to fabless model (SEC, October 15, 2015).
At the time, semiconductor packaging was merely a mature, high-volume manufacturing process. This is no longer the case. Advanced packaging techniques now enable chiplet architectures, where multiple dies are integrated into a single package, and 2.5D/3D stacking, where chips and memory are layered vertically. AMD’s own MI300X accelerator, packaged by Taiwanese semiconductor foundry TSMC using advanced 2.5D techniques, illustrates the strategic value now embedded in the packaging layer. The IP that AMD licensed to Tongfu covers foundational processes upon which advanced packaging capabilities are built. Mastering these substrate-level processes is a prerequisite for scaling to the architectures that define current artificial intelligence (AI) chip packaging. The classification of this work as commodity labor was consistent with how Washington understood semiconductor packaging in 2016, but Beijing’s state fund did not share that assessment. As far back as 2011, the State Council had called for extending tax benefits to packaging to “complete the integrated circuit industry chain” (完善集成电路产业链) (State Council, January 28, 2011).
Licensing Deal Set Stage for Ongoing Entanglement
AMD’s filing with the Securities and Exchange Commission (SEC) omitted the IP license agreement from its exhibits, disclosing only that the company had granted the joint ventures a non-exclusive, perpetual, and irrevocable license to the technology owned and used by the company in its back-end processing business at existing facilities (SEC, October 15, 2015).
Tongfu’s response to the China Securities Regulatory Commission (CSRC), prepared by the law firm King & Wood Mallesons and reviewed by China Merchants Securities (招商证券), provided the operative detail. It describes the license as “non-exclusive, global, fully paid, free, non-transferable, permanent, and irrevocable” (非独占性的、全球性的、全额付清的、免费的、不可转让的、永久性的且不可撤销的). Its scope is facility-based—the joint ventures may use AMD’s technology solely for conducting business at the TF-AMD Suzhou and TF-AMD Penang facilities—but has no restrictions on customers, simply stating that the joint ventures will use AMD’s licensed technology “to provide services to AMD and other customers” (为AMD及其他客户提供服务) (Cninfo, December 28, 2016). [3]
Tongfu therefore can continue to license AMD’s IP, despite not appearing on the BIS whitelist. This is because U.S. regulations do not address whether CFIUS retrospective review authority extends to IP licenses granted before the 2018 Foreign Investment Risk Review Modernization Act (FIRRMA) reform or whether BIS should condition future OSAT approvals on the absence of irrevocable IP licenses from U.S. companies. As the Tongfu–AMD CSRC filing confirms, the license “continues in effect after the agreement expires or terminates” (在该等协议到期或终止后继续有效), even if AMD sells its entire remaining stake (Cninfo, December 28, 2016).
This could lead to U.S. technology being used to directly support the PRC’s national technology strategy. The CSRC filing names Huawei’s chip design subsidiary HiSilicon (华为海思) as an important customer of Tongfu, in a passage directly referencing the former AMD facilities. Whether Tongfu has used AMD’s licensed technology specifically in work for non-AMD customers has not been documented in any subsequent public filing reviewed for this analysis, and whether TF-AMD Penang directly packages Ascend chips is a question Tongfu has declined to answer on investor platforms; but the co-location of AMD-licensed packaging capacity and Huawei’s AI computing infrastructure in Malaysia raises questions about the relationship. TF-AMD Penang announced a Ringgit 2 billion ($454 million) new manufacturing site at Batu Kawan in 2022, bringing total Malaysian capacity past 2.3 million square feet (Invest Penang, June 2022). In May 2025, Malaysia also announced plans to host a Huawei Ascend AI deployment, although the announcement was retracted under U.S. pressure within 24 hours (Malay Mail, May 21, 2025). Malaysia is a useful third-country for PRC firms looking to avoid regulatory scrutiny, as it has no foreign direct investment security review mechanism—a fact documented in the PRC Ministry of Commerce’s investment guide and confirmed in the filing.
Conclusion
No provision in the BIS rule or in existing technology controls restricts how a non-approved OSAT firm uses previously licensed American packaging technology for non-AMD customers. The nine-year lag between the 2016 AMD–Tongfu license and Washington’s decision to recognize packaging as a strategic technology whose export was worth regulating speaks to a broader problem of failing to predict the future strategic significance of emerging technologies.
Any efforts to reverse AMD’s entanglement—such as by sanctioning Tongfu—can no longer be achieved without causing significant disruption to the U.S. firm’s product pipeline. Its purchases from the joint venture reached $1.5 billion in the first nine months of 2025, up 25 percent year-over-year (AMD, November 5, 2025). No alternative supplier can absorb this volume for AMD’s core processor lines.
Notes
[1] An authorization deadline, which went into effect on April 13, 2025, requires all shipments of advanced computing integrated circuits through non-approved packagers to obtain a license. No PRC OSAT firm appears on the whitelist. It should be noted that Tongfu does not appear on any U.S. export control list.
[2] Tongfu Microelectronics [通富微电子股份有限公司], Response to the “Notice of First-Round Feedback on the Review of Administrative Licensing Projects by the China Securities Regulatory Commission”
(No. [163440]) (Revised Draft) [通富微电子股份有限公司 关于《中国证监会行政许可项目审查一次反馈意见通知书》（[163440]号）之反馈意见回复（修订稿）], December 28, 2016.
[3] TF-AMD Penang is also ineligible to appear on the whitelist, as the framework applies an ultimate-parent test that bars entities whose parent is headquartered a “Country Group D:5 destination”, which includes the PRC (see 15 CFR §748.16(a)(1)).
