U.S. Puts Export Curbs on Chinese Chipmaker SMIC, FT Says
U.S. restricts technology sales to Chinese semiconductor giant SMIC.
(Bloomberg) -- The U.S. imposed export curbs on Semiconductor Manufacturing International Corp., the Financial Times reported, delivering a new blow China’s technology industry and sharpening tensions over intellectual property and national security.
U.S. firms will now need a license to export certain products to China’s largest chipmaker because of an “unacceptable risk” that the goods could be used for military purposes, the Financial Times said Saturday, citing a letter the Commerce Department sent to the company. The Commerce Department wouldn’t immediately confirm the contents of the letter.
SMIC has not received an official notice of the sanctions, has no relationship with the Chinese armed forces and does not manufacture goods for any military end-users or uses, the Shanghai-based company said in an emailed statement.
Restrictions against SMIC would mark yet another escalation in the rising tensions between the world’s two most powerful countries. The U.S. and China have clashed on issues from trade to the coronavirus pandemic to a rigid new security law in Hong Kong, imposed by Beijing.
The Trump administration first blacklisted Huawei Technologies Co., preventing the giant telecommunications provider from buying components from American suppliers and pressured allies to follow suit. Then President Donald Trump threatened to ban the video app TikTok from China’s ByteDance Ltd. if the service wasn’t sold to American owners.
The U.S. move against SMIC doesn’t appear to go as far as sanctions used against Huawei and some other Chinese firms. The U.S. has said it was mulling further measures, including adding SMIC to the Commerce Department’s so-called entity list, which would affect exports from a broader set of companies.
“The military end-use rules only apply to a subset of listed U.S. origin items. The Entity List rules apply to all U.S. 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 much as 50% of SMIC’s equipment comes from the U.S., Jefferies estimated, and the company has a market value of more than $29 billion. SMIC’s customers include U.S. chipmakers Qualcomm Inc. and Broadcom Inc., according to Bloomberg data. SMIC shares slumped 23% in one day earlier this month following a report that the U.S. was mulling adding the firm to the blacklist.
“Should the U.S. export ban on SMIC materialize, it will signal an escalated attack by the U.S. on China’s semi industry and more Chinese companies will likely be included,” Jefferies analysts led by Edison Lee said.
After reports of the blacklist threat against SMIC earlier this month, Chinese Foreign Ministry spokesman Zhao Lijian accused the U.S. of “blatant bullying.”
“What it has done has violated international trade rules, undermined global industrial supply and value chains and will inevitably hurt U.S. national interests and its own image,” Zhao told a news briefing in Beijing. “We urge the U.S. to stop over-stretching the concept of national security to oppress foreign companies.”
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