Pavlo Gonchar / Getty Images
One of the last acts of the Trump administration, in mid-January, was to call the Chinese smartphone manufacturer Xiaomi a “communist Chinese military company”. The Department of Defense ruling (which differs from the Department of Commerce’s export ban against Huawei) prohibits US citizens from holding Xiaomi stock or other investments from March 15, 2021. This weekend Xiaomi posted a response to the ruling, which came in the form of legal complaints with the US Departments of Defense and Treasury.
Xiaomi’s complaint has now been addressed to new Biden-appointed secretaries of defense and finance, saying that the decision was “factually incorrect and denied the company legal action.” Xiaomi calls the ruling “illegal and unconstitutional”, denies being controlled by the Chinese military and would like to see the decision reversed.
As Reuters reports, Xiaomi says that a “substantial number” of its investors are US citizens – including three of the top ten shareholders of common stock – and that the ruling would “cause immediate and irreparable damage to Xiaomi.” The company continues, “In addition, Xiaomi’s public association with the Chinese military will significantly damage the company’s reputation towards business partners and consumers, causing reputational damage that cannot be easily quantified or repaired.”
Xiaomi had an IPO in 2018 and today is one of the world’s most valuable smartphone companies, with a market cap of $ 96 billion. Until this ruling, Xiaomi was a big winner in the government’s war against Huawei, gaining market share that had fallen by Huawei after the stifling export ban. Globally, IDC places Xiaomi at number three in the smartphone market share, behind Samsung and Huawei and ahead of Apple.