SMIC: US ​​prohibits China’s top chip manufacturer to use US technology

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The US government imposed severe restrictions on Semiconductor Manufacturing International Corporation (SMIC) on Friday, while the Trump administration continues to put pressure on Chinese companies in recent weeks.

The Department of Commerce announced that dozens of Chinese companies, including SMIC, would be added to a so-called Entity List that effectively cuts them off from US suppliers and technology.

“We will not allow advanced US technology to help build the army of an increasingly belligerent adversary,” US Commerce Secretary Wilbur Ross said in a statement, adding that the company “perfectly illustrates” the risks posed by it. use of American technology by China to modernize its military.

SMIC has previously said it has no relationship with the Chinese military.

The move could cause serious problems for SMIC, which, like many global chip makers, relies on US software, machinery and other equipment to design and manufacture semiconductors. Chinese smartphone maker and 5G network supplier Huawei, for example, saw its sales slow down significantly since it was added to the list last year.

The designation Entity List requires US exporters to apply for a license to sell to SMIC. “Items needed only to produce semiconductors on advanced technology nodes – 10 nanometers or less – will be suspected of denial to prevent such key technology from supporting China’s military and civilian fusion efforts,” said the US Department of Commerce.

SMIC is already dealing with another major headache. Chinese state media reported earlier this week that co-CEO Liang Mong Song is stepping down. In an unusual turn of events, the company said in a statement on Wednesday that it was trying to corroborate those reports, although it was aware of Liang’s “desire to step down under certain conditions.”

The company did not immediately respond to a request for comment on Friday, and it has not submitted any new statements to the Shanghai Stock Exchange about Liang or the US sanctions. While the US announcement came well after the end of regular Shanghai business hours on Friday, Reuters had previously reported that the Commerce Department announcement was coming.

Asked about the Reuters report, a Chinese State Department spokesman on Friday accused Washington of “using its state power to suppress Chinese companies.”

“We urge the US to end the wrongful conduct of unreasonably suppressing foreign companies,” Wang Wenbin told reporters at a regular press conference. “China will continue to take the necessary measures to protect the legitimate rights and interests of Chinese companies.”

Shares of SMIC are down about 5% in Hong Kong on Friday, with losses accelerating after the Reuters report. The stock has lost nearly 10% this week, the worst since September, when media reports suggested the U.S. government was considering imposing restrictions on its operations.

SMIC plays a vital role in realizing China’s technological ambitions. Much of China’s chipset offering comes from foreign companies, which power everything from Chinese smartphones and computers to telecommunication equipment. Last year, the country imported $ 306 billion worth of chips, or 15% of the value of the country’s total imports, according to government statistics.

The company, whose main shareholders are state-owned companies, said earlier this year it wants to invest in technology and catch up with the competition. But SMIC lags behind market leaders three to five years Intel (INTC), Samsung and TSMC (TSM) and analysts say it has a long way to go to be a global competitor.

Liang’s loss could complicate matters, as the company’s recent technological advancements were “directly attributable” to him, Bernstein analysts wrote in a research note earlier this week.

Washington pressure looms to make it even more difficult for the company to catch up with foreign rivals.

Earlier this month, the United States Department of Defense added the company to a list of companies the agency claims are owned or controlled by the Chinese military. That decision means that Americans are not allowed to invest in SMIC.

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