The future of China’s largest chip manufacturer is hanging in the balance amid suggestions that the US government could prevent Semiconductor Manufacturing International Corp (SMIC) from doing business with American companies.
It is reported that the US Department of Defense plans to “blacklist” SMIC because of alleged links with the Chinese military. SMIC is said to be “in complete” shock at the allegations while Beijing has accused Washington of using national security to disguise a trade dispute.
Such a move would mimic recent actions taken against Huawei and would mean SMIC would be unable to receive software updates, technical upgrades or support unless the US supplier in question received a licence from Washington.
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This could threaten the very existence of the company and pose a challenge to China’s bid for technological self-sufficiency. SMIC is even more reliant on US innovations than Huawei.
Shares in SMIC have dropped by almost a quarter in Hong Kong and by 11 per cent in Shanghai, wiping billions of the firm’s value.
Richard Windsor of Radio Free Mobile says the fact that Chinese state-owned Datang Telecom, which supplies its military, has a seat on the SMIC board coupled with allegations of IP infringement means its not out of the question that action could be taken.
“I think that it is quite possible that SMIC is added to the entity list meaning that all of its suppliers will be forced to obtain licences in order to sell equipment and services,” he said. This could be extremely damaging as the US Commerce Department has stated that the default position is to deny applications, putting SMIC in a very tight spot.
“I think that like Huawei, the US is not actively seeking to put it out of business but that its real intent is to put pressure on the Chinese government when it comes to negotiating the overall terms of their long-term relationship.”
In addition to sanctions against Huawei, the US government is also forcing ByteDance to sell the American operations of its social network TikTok.
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