SMIC: The US bans China’s largest chip maker from using American technology

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On Friday, the U.S. government imposed severe restrictions on the Semiconductor Manufacturing International Corporation (SMIC) as the Trump administration continues to put pressure on Chinese companies in recent weeks.

The Commerce Department announced that dozens of Chinese companies, including SMIC, would be added to the so-called list of entities that effectively closes them from U.S. suppliers and technology.

“We will not allow advanced American technology to help build the army of an increasingly belligerent adversary,” U.S. Secretary of Commerce Wilbur Ross said in a statement. company “perfectly illustrates” the risks that China will use American technology to modernize its military.

SMIC has previously said it has no relationship with the Chinese military.

The move could create serious problems for SMIC, which, like many global chip makers, relies on software, machinery and other American equipment to design and manufacture semiconductors. Huawei, the Chinese smartphone maker and 5G network provider, for example, has seen its sales growth slow down significantly since it was added to the list last year.

The designation of the list of entities requires U.S. exporters to apply for a license to sell to SMIC. “Items needed exclusively to produce semiconductors in high-tech nodes (10 nanometers or less) will be subject to a presumption of denial to prevent this key-enabled technology from supporting China’s civilian-military fusion efforts,” he said. say the U.S. Department of Commerce.

SMIC already has problems with another major headache. Chinese state media reported earlier this week that his co-CEO Liang Mong Song is resigning. In an unusual turn of events, the company said Wednesday in a statement that it was trying to confirm these reports, even though it knew of Liang’s “desire to resign under certain conditions.”

The company did not immediately respond to a request for comment on Friday and has not filed any new statement on the Shanghai Stock Exchange about Liang or U.S. sanctions. Although the US announcement came well after the end of Friday’s usual schedule in Shanghai, Reuters had previously reported that the Commerce Department announcement would arrive.

Asked about the Reuters report, a spokesman for China’s Foreign Ministry on Friday accused Washington of “using its state power to suppress Chinese companies.”

“We urge the US to stop its unfair behavior by irrationally suppressing foreign companies,” Wang Wenbin told reporters at a regular news conference. “China will continue to take the necessary measures to safeguard the rights and legitimate interests of Chinese companies.”

Shares of SMIC plunged about 5% in Hong Kong on Friday, with accelerated losses following the Reuters report. Shares have lost nearly 10% this week, the worst since September, when media reports suggested the U.S. government was considering imposing restrictions on its business.

SMIC plays a critical role in fueling China’s technological ambitions. Much of China’s supply of chipsets comes from foreign companies, which power everything from Chinese smartphones and computers to telecommunications equipment. Last year the country imported chips worth $ 306 billion, or 15% of the value of the country’s total imports, according to government statistics.

The company, whose main shareholders are state-owned companies, said earlier this year that it wants to invest in technology and catch up with rivals. But SMIC stays behind the industry leaders for three to five years Intel (INTC), Samsung i TSMC (TSM) and analysts say there is still a long way to go to be a global competitor.

Liang’s loss could complicate matters, as the company’s recent technological advances were “directly attributable to him,” Bernstein analysts wrote in a research note earlier this week.

Washington pressure threatens to make it even harder for the company to catch up with foreign rivals.

The U.S. Department of Defense earlier this month added the signature to a list of companies the agency claims are owned or controlled by the Chinese military. This decision means that Americans are prohibited from investing in SMIC.

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