The United States Department of Commerce has reportedly sanctioned China's biggest chipmaker, Semiconductor Manufacturing International Corporation (SMIC), curbing exports from the company, according to a letter cited by the Wall Street Journal (WSJ) on Saturday.
According to the Commerce Department’s dispatch to the Shanghai-based firm, the WSJ reports, US companies will now need a licence to export certain products to China’s largest chipmaker, because of the “unacceptable risk” that SMIC products could be used for military purposes.
An SMIC spokeswoman cited by the WSJ said in an emailed statement that the firm had not yet received an official notice of the sanctions and was looking into the situation.
The chipmaker reiterated that it has no relationship with the Chinese armed forces and does not manufacture goods for any military end-users or uses.
There has not been any official comment on the report from the US Commerce Department.
Chinese semiconductor firm SMIC finally designated as a military end user (MEU). Fantastic work by Cordell, @SecretaryRoss, and @realDonaldTrump pic.twitter.com/uXZ2VWG7tQ— Tim_Morrison (@Tim_Morrison) September 26, 2020
Escalated US Attack
Earlier reports in September suggested the Trump administration was considering adding the firm to a government Entity List along with Huawei, ZTE and more than 70 Chinese tech firms which are barred from conducting business with US firms.
Adding SMIC to the Commerce Department’s so-called entity list would in effect target exports from a broader set of companies.
“The military end-use rules only apply to a subset of listed US origin items. The Entity List rules apply to all US origin and some foreign-origin items,” said Kevin Wolf, an export control lawyer at Akin Gump and senior Commerce Department official in the Obama administration, as cited by Bloomberg.
Around 50 per cent of SMIC’s equipment originates from the US, with the company having a market value of more than $29 billion, according to Bloomberg data, with US chipmakers Qualcomm Inc. and Broadcom Inc. among SMIC’s customers.
“Should the US export ban on SMIC materialise, it will signal an escalated attack by the US on China’s semiconductor industry and more Chinese companies will likely be included,” analyst Edison Lee of the American multinational independent investment bank and financial services company Jefferies said.
In the wake of the above-mentioned reports, the Chinese semiconductor company reiterated that it strictly abides by the laws and regulations of relevant nations while having maintained cooperative relations with global chipmaking equipment suppliers for years.
“Any assumptions of the company’s ties with the Chinese military are untrue statements and false accusations. The Company is in complete shock and perplexity at the news. Nevertheless, SMIC is open to sincere and transparent communication with the US Government agencies in hope of resolving potential misunderstandings," SMIC said in a statement on its website.
Chinese Foreign Ministry spokesman Zhao Lijian slammed Washington over “blatant bullying.”
“What it has done is violated international trade rules, undermined global industrial supply and value chains and will inevitably hurt US national interests and its own image,” Zhao told a news briefing in Beijing.
China’s Tech Giants in the Crosshairs
The US Department of Commerce added dozens of internationally based Huawei affiliates to its Entity list in August 2020, restricting their ability to do business with American firms. The decision expanded on rules issued in May subjecting companies to enhanced licensing requirements if they sold third-party computer chips or chip designs to Huawei that rely on US software or manufacturing equipment.
Back in 2019 the department essentially banned US companies from selling parts and components to 68 Huawei affiliates, allowing, however, for temporary waivers that enabled limited transactions to ease the transition for American suppliers.
Those waivers expired in August 2020, with a fresh order subjecting an additional 38 Huawei affiliates around the world to similar restrictions.
Fresh measures on the part of Washington could block Huawei from gaining access to chipsets, in yet another stinging blow to the Shenzhen-based tech giant.
Earlier this month China had launched plans to boost the mainland chipmaker and others, seeking to distance itself from US technologies.
Sanctions targeting the Chinese partially state-owned publicly-listed semiconductor foundry company, SMIC, would come as yet another step in the escalating tensions between the US and China, that have been exchanging invective on issues ranging from trade, their respective governments’ handling of the coronavirus pandemic, and perceived threats to intellectual property and national security.
The Trump administration began its onslaught by blacklisting Huawei Technologies Co., preventing the giant Chinese telecommunications provider from buying components from American suppliers and pressuring allies to follow suit.
Subsequently, President Donald Trump threatened to ban the video app TikTok from China’s ByteDance Ltd. if the service weren’t sold to American owners, sparking indignation among Chinese executives and government officials, who have repeatedly dismissed all allegations of spying and presenting a security threat.