US Tightens Exports to China’s Chipmaker SMIC, Citing Risk of Military Use

America has imposed restrictions on exports to China’s greatest chip maker SMIC after concluding there may be an “unacceptable threat” tools provided to it may very well be used for navy functions.

Suppliers of sure tools to Semiconductor Manufacturing Worldwide Company will now have to use for particular person export licenses, in accordance with a letter from the Commerce Division dated Friday and seen by Reuters.

The most recent transfer marks a shift in US coverage from earlier this yr, when candidates searching for “navy finish consumer” licences to promote to SMIC had been instructed by the Commerce Division that the licenses weren’t vital, in accordance with three folks conversant in the matter.

SMIC mentioned it had not obtained any official discover of the restrictions and mentioned it has no ties with the Chinese language navy.

“SMIC reiterates that it manufactures semiconductors and offers companies solely for civilian and business end-users and end-uses,” SMIC mentioned.

“The Firm has no relationship with the Chinese language navy and doesn’t manufacture for any navy end-users or end-uses.”

SMIC is the newest main Chinese language expertise firm to face U.S. commerce restrictions associated to nationwide safety points or U.S. overseas coverage efforts. Telecoms large Huawei Applied sciences had its entry to high-end chips curtailed by its addition to a Commerce Division blacklist referred to as the entity checklist.

“There’s been a variety of protection on the Trump administration’s actions relating to TikTok, however the extra important motion – from a world financial standpoint and that may have appreciable ripple results by way of world provide chains – are the growing restrictions on SMIC and different Chinese language nationwide champions like Huawei,” mentioned Nicholas Klein, a Washington lawyer who makes a speciality of worldwide commerce. He mentioned these actions are extra doubtless to attract a retaliatory response from Beijing.

America has moved to ban the favored brief video app TikTok, citing nationwide safety considerations stemming from its Chinese language possession.

SMIC’s new designation isn’t as extreme as being blacklisted, which makes it troublesome to get any export license accepted.

The Pentagon earlier this month, Reuters was first to report, mentioned it was working with different companies to find out whether or not to blacklist SMIC for its purported hyperlinks to the Chinese language navy.

US corporations together with Lam Analysis, KLA, and Utilized Supplies, which provide chipmaking tools, could now must get licenses to ship sure items to SMIC.

It’s unclear which suppliers obtained the letter, however usually as soon as the Commerce Division involves the conclusion that there’s a threat of navy use or diversion, it sends that data to the businesses.

The Commerce Division’s Bureau of Trade and Safety declined on Saturday to remark particularly on SMIC, however mentioned it was “continually monitoring and assessing any potential threats to U.S. nationwide safety and overseas coverage pursuits”.

The administration has more and more educated its deal with Chinese language corporations that bolster Beijing’s navy. Final month, the US blacklisted 24 Chinese language corporations and focused folks it mentioned had been a part of building and navy actions within the South China Sea, its first such sanctions towards Beijing over the disputed strategic waterway.

© Thomson Reuters 2020

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