US Places Restrictions on Chinese biggest chipmaker SMIC

Another company adds up to the list of restrictions.

The US places restrictions on China’s biggest chipmaker, SMIC. The Semiconductor Manufacturing International Corporation (SMIC) might no longer be able to import technology from the US it uses for manufacturing chips. The Trump administration fears the use of US technology will empower the Chinese military, and that’s an unacceptable security risk. 

SMIC raised $7.6bn earlier this year and became the country’s biggest initial public offering. The company plays a crucial role when it comes to China’s self-sufficiency plans.

“It all depends on how the US implements this. In the worst-case scenario, SMIC is completely cut off, which would severely set back China’s ability to produce chips. This would be a tipping point for US-China relations,” said Paul Triolo, head of tech policy analysis at consultancy Eurasia Group.

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This move from the US commerce department confirms that companies now require a license to export any products to SMIC. However, SMIC is not the first company to face this situation, since the Trump’s administration did the same to Huawei this year in fresh sanctions.

The US sanctions previously limited SMIC from serving its largest customer Huawei. Now it might not be able to offer its services to its second-largest customer, Qualcomm, a US company that uses SMIC chips. 

According to a Washington-based lawyer, Nicholas Klein, the Tiktok situation might have received more spotlight, but restrictions on SMIC play a much more significant role from a global economic standpoint. He added that these actions are likely to face a retaliatory response from China.

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However, SMIC told Reuters that “SMI” reiterates it manufactures semiconductors and provides services solely for civilian and commercial end-users and end-uses. The company has no relationship with the Chinese military and does not manufacture for any military end-users or end-uses.

Claiming them to be matters of national security, President Trump and his administration have recently taken severe actions, like threatening to shut down social media apps Tiktok and WeChat, to worsen the US-China relations. Lately, the US administration has increased its focus on Chinese companies that back the Chinese military and, as a result, blacklisted more than 20 companies last month. 

Featured image: Reuters

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