Lutnick should ban Chinese memory maker CXMT from U.S., Sen. Cotton says

Sen. Tom Cotton , R-Ark., is urging the Trump administration to take a harsher stance toward Chinese memory maker ChangXin Memory Technologies .

"CXMT, one of Communist China's national memory chip champions, poses a growing risk to our economic prosperity and military superiority," Cotton wrote in a letter sent Thursday to Commerce Secretary Howard Lutnick. "The U.S. must take action to prevent CXMT from gaining a stronger foothold in the global market."

CXMT is the world's fourth-largest producer of DRAM – or dynamic random access memory – which powers many basic functions of computers and smartphones.

Cotton, in a letter first obtained by CNBC, is asking Lutnick to push CXMT onto the department's Bureau of Industry and Security Entity List, which would significantly restrict U.S. firms' ability to do business with the company.

"It basically means that U.S. companies are not allowed to do business with that entity-listed company, and that entity-listed company does not get access to U.S. technology," said Kyle Chan, a Brookings Institution fellow who studies China's technology development.

However, with the right production technology, it can also form the building blocks of HBM, or high-bandwidth memory. HBM is an extremely high-demand product that powers AI chips made by Nvidia , Google and Amazon Web Services, which are central to the growth of artificial intelligence giants including Anthropic and OpenAI. It's made by just three main companies: Samsung , SK Hynix and Micron .

The Commerce Department and CXMT didn't immediately respond to CNBC's requests for comment.

While the company's HBM capabilities are nascent, according to Counterpoint, Reuters reported that the company was to begin production of the chips, even though yields are low at just 20% to 30%. That means that the majority of the chips it produces are faulty.

CXMT is already on the Pentagon's "1260H" list , which identifies several dozen Chinese companies with ties to Beijing's military. But Chan says that list doesn't come with stringent restrictions for U.S. businesses.

The Wall Street Journal reported Aug. 9 that Apple was considering using CXMT's memory in iPhones and Macs in light of the global shortage driven by the AI buildout. Being on the Entity List could change that.

"From the U.S. government standpoint, their concern is that working with CXMT would – even as a customer, just buying their products – would help to improve their ability to ramp up memory chip production, and also maybe help China get further down the road towards HBM," Chan said. "It's part of the broader effort to stymie or slow down China's own chip development."

Cotton alluded to CXMT's efforts to break into the HBM market in his letter.

"[CXMT's] decision to move forward in less than ideal conditions highlights both Communist China's desperation for chips and manufacturing struggles without advanced equipment and knowledge," he wrote. "More can be done to ensure that CXMT is cut off from the financial and technological resources that aid its supply chain and undercut American growth."