US Government Sanctions Chinese Chipmaker SMIC, FT Reports

Yolanda Curtis
September 27, 2020

The new rules were announced in a letter to the industry Friday, which says that "exports to Semiconductor Manufacturing International Corp. or its subsidiaries risk being used for Chinese military activities", the report continued.

In a letter dated September 25 and seen by the Nikkei Asian Review, the U.S. Department of Commerce instructs American companies to apply for licenses in order to ship certain controlled items to SMIC.

The Pentagon said earlier this month that it was considering blacklisting SMIC, which United States authorities have identified as a threat due to an alleged "fusion" of civilian and military technologies.

When presented with a copy of the letter by Nikkei, SMIC said it will "continue to engage constructively and openly with the U.S. Department of Commerce".

SMIC is the latest leading Chinese technology company to face USA trade restrictions related to national security issues or US foreign policy efforts.

Exports to China's largest chipmaker pose an "unacceptable risk" of being diverted to "military-end use", the London-based newspaper said Saturday, citing a US Department of Commerce letter to the company.

This decision comes as a big blow to China's efforts to compete in advanced technology. The company offers chips and services "solely for civilian and commercial end-users and end-uses", according to the representative.

USA companies including Lam Research, KLA Corp and Applied Materials, which supply chipmaking equipment, may now need to get licenses to ship certain goods to SMIC.

SMIC becomes the second leading Chinese technology company to face U.S. trade curbs after telecoms giant Huawei Technologies, whose access to high-end chips has been curtailed by its addition to a so-called entity list. It said that suppliers "must submit an application for an individually-validated license prior to exporting, reexporting or transferring in-country" on certain sensitive technologies. Last year, excluding Huawei, more than 40 Chinese entities were placed on the blacklist. SMIC's customers include US chipmakers Qualcomm Inc. and Broadcom Inc., according to Bloomberg data.

The US Department of Commerce did not immediately respond to FT's request for comment. Back in late 2017, it hired former Samsung and Taiwan Semiconductor Manufacturing Co. executive Liang Mong-song to be its co-CEO to help it upgrade technologies.

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