US blacklists dozens of Chinese firms including SMIC, DJI

WASHINGTON (REUTERS) – The United States confirmed on Friday (Dec 18) it will add dozens of Chinese companies, including the country’s top chipmaker SMIC and Chinese drone manufacturer SZ DJI Technology, to a trade blacklist.

The move, which was first reported by Reuters, is seen as the latest in Republican President Donald Trump’s efforts to cement his tough-on-China legacy.

It comes just weeks before Democratic President-elect Joe Biden is set to take office on Jan 20.

The US Commerce Department confirmed the decision early on Friday, saying the action against SMIC “stems from China’s military-civil fusion (MCF) doctrine and evidence of activities between SMIC and entities of concern in the Chinese military industrial complex.”

A US Commerce Department official told reporters on a conference call that the world’s biggest drone company DJI was being added to the list.

DJI did not immediately respond to a request for comment.

Commerce Secretary Wilbur Ross said in a statement that the department would “not allow advanced US technology to help build the military of an increasingly belligerent adversary.”

Ross said the government would presumptively deny licences to prevent SMIC from accessing technology to produce semiconductors at advanced technology levels – 10 nanometers or below.

In an address to the Asia Society on Friday, China’s State Councillor Wang Yi, who is also the country’s foreign minister, noted the expanding list of US sanctions and called on Washington to stop its “arbitrary suppression” of Chinese companies.

The Commerce Department said it was adding a total of 77 companies and affiliates to the so-called entity list, including 60 Chinese companies. Reuters reported earlier the department was adding about 80 companies, most of them Chinese.

China’s foreign ministry said that if true, the blacklisting would be evidence of US oppression of Chinese companies and that Beijing would continue to take “necessary measures” to protect their rights.

“We urge the US to cease its mistaken behavior of unwarranted oppression of foreign companies,” ministry spokesman Wang Wenbin told a regular news conference in Beijing on Friday.

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SMIC did not immediately respond to requests for comment.

The designations by the Commerce Department include some entities in China that enable alleged human rights abuses and some helping it construct and militarise artificial islands in the South China Sea, the agency said.

It also cited entities that acquired US-origin items in support of the People’s Liberation Army’s programmes, and entities and persons that engaged in the theft of US trade secrets.

Companies previously added to the list include telecoms equipment giants Huawei Technologies and 150 affiliates, and ZTE over sanction violations, as well as surveillance camera maker Hikvision over suppression of China’s Uighur minority.

Fraying ties

Shares in SMIC, formally the Semiconductor Manufacturing International Corp, fell 5.2 per cent in Hong Kong on Friday, while the company’s Shanghai-listed shares declined 1.8 per cent. The benchmark indices in the two markets were down less than 1 per cent.

SMIC had already been in Washington’s crosshairs.

In September, the Commerce Department mandated that suppliers of certain equipment to the company apply for export licenses after concluding there was an “unacceptable risk” that equipment supplied to it could be used for military purposes.

Last month, the Defence Department added the company to a blacklist of alleged Chinese military companies, effectively banning US investors from buying its shares starting late next year.

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SMIC has repeatedly said that it has no relationship with the Chinese military.

The entity list designation would force SMIC to seek a special license from the Commerce Department before a US supplier could send it key goods, part of a bid by the administration to curb its access to sophisticated US chipmaking technology.

The Commerce Department is adding nearly a dozen SMIC-affiliated companies to the entity list, Ross said.

SMIC is the largest Chinese chip manufacturer but trails Taiwan Semiconductor Manufacturing, the industry’s market leader. It has sought to build out foundries for the manufacture of computer chips that can compete with those of TSMC.

Ties between Washington and Beijing have grown increasingly antagonistic over the past year as the world’s top two economies sparred over Beijing’s handling of the coronavirus outbreak, imposition of a national security law in Hong Kong and rising tensions in the South China Sea.

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