The US punishes China’s largest chip company

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The administration of US President Donald Trump has issued an export restriction order with SMIC, China’s largest semiconductor chip maker.

The ban will cause some US companies such as Lam Research, KLA Corp, and Applied Materials to apply for an export license from the government to continue supplying components and software to chip company Semiconductor Manufacturing International Corporation (SMIC).

In the announcement sent on 25/9, the US Commerce Department said the ban came after it recognized an “unacceptable danger” that components sent to SMIC could be used for military purposes.

The new decision goes against the stance set by the US earlier this year. At that time, several companies applied for a military license to supply components for SMIC, but the US Commerce Department said it was not necessary.

The Pentagon proposed to restrict exports to SMIC because it was worried that the chip company would facilitate technology development for the Chinese army, government sources said.

Responding to Reuters, the SMIC representative said that he has not received any official documents on export restrictions and confirmed that he does not have a relationship with the Chinese military.

“SMIC produces semiconductor chips and provides services for end-users … The company has no relationship with the Chinese military, does not manufacture hardware for any military organization”, China’s largest chip company SMIC said.

SMIC is the second largest Chinese company to be punished by the US for national security concerns. Previously, Huawei telecommunications group also received an order to restrict exports because it was on the blacklist of the US Department of Commerce from May 2019. Currently, SMIC has not been blacklisted.

Huawei President Guo Ping said the US sanctions pose a huge challenge to the company’s manufacturing operations, especially affecting the smartphone and semiconductor division. From September 15, Huawei stopped producing Kirin processor chips due to US sanctions.

In early September, there were rumors about the US Department of Commerce planning to blacklist SMIC because it thinks it has ties to the Chinese military.

Nicholas Klein, a lawyer specializing in international trade in Washington, said that from an economic perspective, increasing restrictions on SMIC and Huawei would have a greater impact than banning apps like TikTok. He argued that these actions could cause Beijing to retaliate.

The Commerce Department’s Industry and Security Bureau declined to comment on the new restriction order, but said it “continuously monitors and assesses potential threats to foreign policy and security interests. America”.