USA slaps trade restrictions on China's top chipmaker

Marco Green
September 27, 2020

The Commerce Department "has determined that exports to SMIC or its subsidiaries, including those listed above, may pose an unacceptable risk of diversion to a military end use in the People's Republic of China pending the US government's review of SMIC and its subsidiaries", said the letter, which was reported earlier by the Financial Times and the Wall Street Journal.

Restricting U.S. tech exports has become a favorite Trump administration tool to counter China's rise as a technology and military power and to punish Chinese entities for alleged human-rights abuses.

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 becomes the second leading Chinese technology company to face United States 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.

The Entity List, overseen by the Commerce Department, now includes more than 300 Chinese companies.

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.

In April, the administration announced a tightening of export rules aimed at preventing USA companies from selling products that could strengthen China's military.

"SMIC reiterates that it manufactures semiconductors and provides services exclusively for civilian and commercial end-users and end-uses", SMIC said. SMIC relies heavily on USA chip equipment for its daily operations, and losing access to American suppliers could set the company's technological capabilities back by 10 years. 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. "The Company has no relationship with the Chinese military and does not manufacture for any military end-users or end-uses", she said. China has previously declared its opposition to U.S. sanctions on Chinese companies.

SMIC has already lost business with its biggest customer Huawei due to USA sanctions. SMIC also supplies to Qualcomm of the USA and many of China's local chip developers.

According to the report, the Commerce Department didn't respond to a request for comment very early on September 26.

Other reports by Click Lancashire

Discuss This Article