FCC Ban on Chinese Labs Shocks Global Supply Chains

The Federal Communications Commission (FCC) in the U.S. announced it has launched proceedings to revoke U.S. recognition for seven Chinese testing laboratories on September 8. The FCC also confirmed that recognition for four other Chinese labs has expired and will not be renewed.

New FCC rules in May prevent any Chinese lab linked to firms listed on the FCC's Entity List from certifying devices for the U.S. market.

FCC chair Brendan Carr said, "Foreign adversary governments should not own and control the labs that test the devices the FCC certifies as safe for the U.S. market."

Under U.S. regulations, all electronic devices that emit radio frequencies must undergo certification by the FCC-accredited laboratory before entering the American market. Currently, 175 Chinese labs hold FCC accreditation, which is greater than the number of testing laboratories in the United States. About 75 percent of FCC-recognized tests currently occurs in China.

Though seven out of 175 seems to be a small number, the FCC is soliciting public feedback on whether to broaden the ban to include all labs in China and other nations classified as foreign adversaries. An immediate concern is the FCC's potential revocation of all Chinese laboratories' accreditation.

From 5G to TikTok to testing labs, branding Chinese tech a "national security threat" is the U.S. government's go-to tactic. Yet security concerns alone cannot explain the FCC's crackdown on Chinese labs, behind which lie other issues.

Last month, the Foundation for Defense of Democracies (FDD), an American think tank, stated in a written public comment to the FCC, "China's role within telecommunications certification bodies and other laboratory testing reinforces its manufacturing dominance. Proximity of manufacturing plants to these testing facilities allows companies to move prototypes directly from factory floor to a test lab within hours, shortening lead times and lowering costs. This clustering effect cements China's position as the global center for electronics production and certification while allowing major firms to influence each aspect of the supply chain, from design to certification."

Prior to this, in January, Michael Schafer, CEO of Compliance Testing, an accredited American testing service, petitioned the FCC chair and U.S. President Donald Trump that the 28 billion USD certification services market should relocate from Chinese facilities to U.S. laboratories. "This would be the first step in getting U.S. manufacturing out of China and back to the U.S.," he wrote.

Clearly, security concern is just a pretext. The FCC aims to dismantle China's telecommunications manufacturing clusters and erode its competitive advantages in order to accelerate the reshoring of critical industries to America.

While the ultimate outcomes remain uncertain, immediate disruptions are inevitable. Electronic certification has a critical role in global supply chains, directly impacting efficiency, cost, and globalization. The FCC's revocation will severely destabilize the global electronic supply chains. Numerous enterprises that manufacture or certify products in China for U.S. export will now have to transfer their testing labs, causing logistical obstacles and triggering a rise in costs.

In May, prior to the FCC's new regulations, CTOL Digital Solutions, an IT consultancy based in Switzerland, published an analysis indicating that the impending rules would trigger price escalation among non-Chinese testing firms. Certification laboratories outside China were reportedly raising quotes by 15-30 percent.

For U.S. consumers, changes in regulations may bring significant impacts, as the higher certification costs will be passed on to retail prices. Concurrently, non-Chinese laboratories may struggle to accommodate the relocated certification workload from China, resulting in backlogs, delay in some product launches, and shortage of certain devices.

The FDD also admitted that it will drive up testing cost and cause temporary inventory bottlenecks, and businesses may shift these costs onto consumers. Small-scale producers particularly will find this difficult to resolve as their certification fees constitute a larger share of unit costs.

China's laboratories have achieved a strategic position in testing accreditation due to decades of manufacturing efforts and market evolution. For most electronic manufacturers, conducting testing near the production base has significant logistics advantages and cost-effectiveness.

By disregarding these economic fundamentals, the FCC is compelling manufacturers to violate market principles. Ultimately, the additional costs, whether through price hikes or supply chain delays, will inevitably fall on American consumers.

Source: Science and Technology Daily