The United States concluded that the equipment exported to SMIC, China’s largest chip manufacturer, may be used for military purposes, but the equipment poses an “unacceptable risk” equipment, so the United States has imposed restrictions on it.
According to Reuters, a letter sent by the US Department of Commerce on Friday said that suppliers of certain equipment from Semiconductor Manufacturing International must now apply for individual export licenses.
According to three people familiar with the matter, the latest move marked a change in US policy from the beginning of this year, when the Department of Commerce told applicants seeking “military end-user” licenses to sell products to “SMIC” is unnecessary.
SMIC stated that it has not received any official notification of the restrictions and that it has no relationship with the Chinese military.
SMIC stated: “SMIC reiterates that it manufactures semiconductors and only provides services for civilian and commercial end users and end uses.”
“The company has no relationship with the Chinese military and does not manufacture products for any military end users or end uses.”
SMIC is the latest leading Chinese technology company to face US trade restrictions related to national security issues or US foreign policy. The telecommunications giant Huawei Technologies Co., Ltd. has restricted the use of high-end chips by joining the Ministry of Commerce’s blacklist (known as the entity list).
“The Trump administration’s actions against TikTok have received a lot of reports, but from the perspective of the global economy, more important actions will have a huge ripple effect in the global supply chain. This is a major impact on SMIC and other Chinese National champions strictly limit Huawei.” said Nicholas Klein, a Washington lawyer specializing in international trade. He said these actions are more likely to cause a retaliatory response from Beijing.
The United States has taken action to ban the popular short video application TikTok on the grounds that China’s ownership has caused national security issues.
SMIC’s new name is not as strict as being blacklisted, which makes it difficult to obtain any export license approval.
The Pentagon first reported earlier this month that Reuters said it was working with other agencies to determine whether to blacklist SMIC’s links with the Chinese military.
American companies that provide chip manufacturing equipment, including Lam Research, KLA, and Applied Materials, may now need to obtain a license to ship certain products to SMIC.
It is not clear which supplier received this letter, but usually once the Ministry of Commerce has concluded that there is a risk of military use or diversion, it will send this information to the company.
The Bureau of Industry and Security of the Department of Commerce declined to comment specifically on SMIC on Saturday, but stated that it “is continuously monitoring and evaluating any potential threats to US national security and foreign policy interests.”
The Obama administration has increasingly focused training on Chinese companies that strengthen Beijing’s military capabilities. Last month, the United States blacklisted 24 Chinese companies and targets, which they said were part of construction and military operations in the South China Sea. This is the first such sanctions against Beijing on a controversial strategic waterway.
© Thomson Reuters 2020