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The US Department of Defense on Thursday (December 3) included China’s largest chip maker, SMIC, in the list of “Chinese military companies”. This means that US investors are prohibited from holding or trading SMIC shares.
SMIC replied that being included in the list has little impact on operations.
“Because SMIC relies on the resources of American companies to manufacture semiconductor chips. This puts SMIC’s business in the hands of the US Department of Commerce, and the US Department of Commerce can decide whether to license based on specific circumstances “. Radio Free research company Mobile founder Richard Windsor (Richard Windsor) said.
“This has increased the difficulty of obtaining a license, increasing the likelihood of being included in the entity list, and has led to a reduction in demand for its shares as US investors will no longer be able to purchase SMIC shares.” .
The list of “Chinese military enterprises” originated from the United States in 1999. This law requires the Ministry of National Defense to compile a list of companies owned or controlled by the Chinese military, but the Ministry of National Defense will not compile the list until to 2020. Earlier this year, Hikvision, China Telecom and China Mobile were added to this list.
In addition to SMIC, the US also included the other three Chinese companies including China Construction Technology Corporation (CCTC), China International Engineering Consulting Corporation (CIECC), and CNOOC (CNOOC) in this list.
Image source,EPA
In addition to technical limitations, US investors are also prohibited from holding or trading SMIC shares.
This means that when American companies provide related technologies or products to these four companies, they must obtain government permits and will not be able to obtain financial support from the United States.
As of December 4, a total of 35 Chinese companies have been included in the list of “Chinese military enterprises”. This list is different from the other entity list. In terms of control measures, the list of entities is narrower.
The US Department of Defense said the Chinese government is using the expertise of “civilian entities” such as companies and universities to modernize military capabilities. The SMIC denied any connection with the military.
An executive order signed by US President Trump in November sought to prevent US capital from funding China’s military modernization. SMIC previously stated that some of its US suppliers have received letters informing them that they will be subject to new export restrictions.
This indicates that the U.S. Department of Commerce may add the company to its trade blacklist, the so-called entity list. If this happens, it could have a major impact on chip manufacturing and semiconductor industry planning in China.
Analysis: Trump continues to pressure China at the end of his term, making it difficult for Biden to look back
BBC Security Reporter Gordon Corera
This is another sign that the Trump administration intends to use the last time to continue putting pressure on China. Trump tried to block a tough Chinese policy for the incoming Biden administration.
There may be wide-ranging interpretations and controversies regarding the definition of military-related companies, but Washington is using that as leverage in the chip battle. Because this is a key area of technological competition.
Washington knows this is an area where China is relatively backward, but it urgently needs to catch up. The Trump administration will also expect the Biden administration to have a hard time lifting existing sanctions against China for fear of being accused of being “weak” against Beijing.
Lots of restrictions
Image source,EPA
SMIC is one of the world’s leading integrated circuit foundry companies and the largest and most technologically advanced chip company in mainland China.
SMIC was founded in 2000 and has since become China’s most famous chip foundry. However, SMIC’s most advanced products are two generations behind competitors Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung of South Korea.
SMIC is currently unable to produce small transistors like these competitors, so it is unable to produce the most advanced processors for the latest smartphones and other advanced gadgets.
The reason is partly due to existing US restrictions on the company.
At the moment, the only way for the center to produce the most advanced chips is to use the production equipment of the Dutch company ASML.
SMIC ordered a $ 150 million (£ 111 million) lithography machine from ASML in 2018, which uses a laser focused from a giant mirror to print small patterns on silicon. But Reuters reported that the White House convinced the Dutch government to block exports for security reasons.
When the BBC asked if the transaction was still blocked, an ASML spokesperson declined to comment.
SMIC responded to the BBC saying, “SMIC provides services only for civilian and commercial end users and end users. It has no relationship with the Chinese military and does not manufacture products for military end users or end use.”
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