The US’ trade bans on Chinese companies such as Huawei and ZTE could have been only the beginning. The Trump administration is considering whether to include China’s leading chipmaker SMIC into a trade blacklist, a Defense Department official said, as the United States escalates its crackdown on Chinese companies. A Pentagon spokeswoman said the Defense Department was operating together with different agencies to find out whether to make the move against Semiconductor Manufacturing International Corporation (0981. HK), which would force U.S. providers to look for a difficult-to-obtain license before shipping to this company.The Trump government is considering imposing export limitations on Semiconductor Manufacturing International Corporation, China’s largest maker of semiconductors, according to a Defense Department spokesperson.
Exclusive: The Trump administration is considering whether to add China's top chipmaker SMIC to a trade blacklist, a Defense Department official told @Reuters, as the United States escalates its crackdown on Chinese companies https://t.co/oWKmlKfU8Y pic.twitter.com/Jl3DL4YMCp— Reuters (@Reuters) September 4, 2020
The Defense Department has verified to the Wall Street Journal which agencies are discussing whether they’ll add China’s Semiconductor Manufacturing International Corp. (SMIC) to a Commerce Department entity record that effectively bans trade with American companies. As China’s largest contract chip manufacturer, SMIC could suffer a significant blow — it couldn’t get a lot of this US equipment it uses to make and test chips.
The latest threat by the Trump government to blacklist Semiconductor Manufacturing Industry Corporation (SMIC), China’s biggest manufacturer of silicon processors, will influence scores of customers and suppliers across the world, as they have caught in the crossfire of a US-China technologies warfare, fuelled by the worst bilateral relations in decades.
Sources speaking into the WSJ said there was an issue SMIC may be supporting China’s defense mechanisms. US defense contractor SOS International recently issued a report claiming that SMIC worked with among China’s biggest defense companies, which university researchers connected to the Chinese military were designing jobs to use SMIC engineering. It may be”impossible” for its investigators’ attempts to use chips made anywhere else, SOS said.
SMIC rejected the alleged defense connection in a declaration. It insisted that it provides chips and services”solely” for civilian applications, which it had”no connection with the Chinese military.” SOS has defended the report also argued that SMIC was”deeply embedded” in military jobs.
SMIC explained in an announcement on Saturday that it was”in full shock” over the information but was amenable to communicating with U.S. government agencies in hopes of resolving any misunderstandings.
Chinese chipmaker Semiconductor Manufacturing International Corp. said that its technology isn’t right for military usage after Reuters reported that the Trump government was contemplating adding SMIC into a trade blacklist.
“The business manufactures semiconductors and offers services exclusively for civilian and commercial end-users and end-uses. “Any assumptions concerning their company’s ties with the military are false statements and false accusations.”
Earlier this past week, the Pentagon made a proposition to place SMIC on the entity list to the End User Committee, a panel led by the Commerce Department that also includes the Energy and State Departments and makes conclusions concerning entity listings, a individual familiar with the issue said. It was not clear whether the other agencies supported the program.
The Trump government has regularly employed the thing list – which now includes over 275 China-based companies – to hit key Chinese businesses, from telecoms gear giants Huawei Technologies [HWT.UL] and ZTE (000063. SZ) over sanction offenses, to surveillance camera maker Hikvision (002415.
The army links have not been rigorously established, and there’s no guarantee the discussions will lead to a ban.
When the US failed add SMIC into the blacklist, though, it might dramatically escalate an already stressed trade war. Because there are sometimes no or few choices to American parts, it might face severe difficulties growing or keeping its own factories. That, then, could hamper customers that include Huawei and other Chinese tech giants. China might expand its retaliation and hurt US companies that rely on Chinese manufacturing and parts for their products. The feud may get very ugly, very fast.
US considers blacklisting China’s largest chipmaker SMIC.— Arjun Kharpal (@ArjunKharpal) September 6, 2020
China has put a lot of focus on developing its domestic chip industry, a move which has been given further impetus by the trade war. Blacklisting SMIC, which is key to China's plans would be hugehttps://t.co/6AwJ1TB3IL
SMIC is the biggest Chinese chip maker but is second-tier to rival Taiwan Semiconductor Manufacturing Co Ltd (2330. TW), the business market leader. It has sought to build out foundries for the production of computer chips which could compete with TSMC.
Which nations do the majority of SMIC’s providers come from?
The US constitutes the largest geography of source for SMIC’s providers, together with US-listed firms making up 10 of the top 30 sellers. The biggest American supplier will be Lam Research of Fremont, California, a producer of plasma etching machines used in the production of silicon chips. Lam Research led to 8.5 per cent of SMIC’s cost as of May 4, bringing in 1.1 per cent of its earnings from the Chinese firm.
Businesses listed on mainland China’s trades make up the second-largest group, together with six one of SMIC’s top 30 providers.
As tensions grow between the U.S. and China, U.S. officials are pushing other authorities around the world to put restrictions on Huawei, asserting that the corporation will give data to the Chinese government for spying.
The Trump administration also issued executive orders last month banning transactions with ByteDance and is forcing the company to divest the U.S. surgeries of this popular app TikTok.