US considering adding china’s largest chip manufacturer’s SMIC on blacklisting entities. China’s biggest contract chipmaker plunged over 19% on 7th Sep after the US government said it was considering putting export restrictions on the company. SMIC’s recently listed Shanghai shares were down 9.2% today.
Semiconductor Manufacturing International Corporation (SMIC) said it was “in complete shock and perplexity” after the Pentagon revealed it had proposed the firm be added to a government blacklist.
“SMIC would be unable to update the software of any of its US machines or have personnel from suppliers helping it to get them working, It would also be unable to buy any more equipment or any upgrades for new technologies. If this were to persist for the long term, it would represent an existential threat that could see the company close its doors.” Richard Windsor, founder of research firm Radio free mobile.
This would restrict suppliers from providing it with American-based tech without special permission. Beijing said it was “firmly opposed”.
A foreign ministry spokesman accused Washington of “blatant bullying” and using supposed national security concerns to break international trade rules.
The move could make SMIC the next focus of a trade clash that has already threatened Chinese tech firm Huawei’s survival and forced Bytedance to negotiate the sell-off of video-sharing app TikTok’s American operations.
SMIC has a less advanced production line than some of its rivals – it cannot make transistors as small as they can, limiting its ability to produce some of the cutting-edge chips featured in the latest smartphones.
Even so, the firm is an important semiconductor provider to Chinese companies, including Huawei, while also serving international clients including Qualcomm.
Analysts have said a trade ban could threaten SMIC’s existence, and in turn, set back Beijing’s efforts to spur on the country’s semiconductor industry as part of its Made in China 2025 strategy.
The US department of defense is assessing whether to add SMIC to the commerce department’s so-called entity list such an action would ensure that all exports to SMIC would undergo a more comprehensive review a department of defense spokesperson said
“China has put a lot of emphasis on developing its domestic semiconductor industry a move that has gained further impetus amid the trade war with the US mic which manufactures chips is however still behind rivals like Taiwan’s TSMC and South Korea’s Samsung Electronics in terms of technology”.
SMIC also relies on American chip-making equipment. if it were to be added to the entity list that could make it more difficult for the company to obtain the gear needed to develop its capabilities and hurt production the us has used that particular blacklist to target other companies including Huawei and a number of surveillance and artificial intelligence firms.
In the case of Huawei, the blacklisting meant that it was cut off from using a licensed version of google android’s operating system for its smartphones a move which has hurt the Chinese technology giant’s smartphone business outside of its domestic market earlier this year the US made further moves to cut Huawei off from key semiconductor supplies as tensions between China and the US continue to rise with technology cut in the middle.
In SMIC’s case, the department of defense is considering whether the chipmaker aids china’s military and defense apparatus the wall street journal reported citing people briefed on the discussions the newspaper pointed to a report by US defense contractor SOS international that alleges SMIC has worked with a large Chinese defense company and that university researchers linked to the military have tailored their work to fit SMIC’s technology.
SMIC denied that it works with the military any assumptions of the company’s ties with the Chinese military are untrue statements and false accusations it said in a statement posted on WeChat on Saturday the company is in complete shock and perplexity to the news nevertheless SMIC is open to sincere and transparent communication with us government agencies in hope of resolving potential misunderstandings
