US blacklists 60 Chinese companies, including SMIC

Bloomberg

The US Commerce Department announced it’s blacklisting Semiconductor Manufacturing International Corp (SMIC), drone maker SZ DJI Technology Co and more than 60 other Chinese companies “to protect US national security.”
“This action stems from China’s military-civil fusion doctrine and evidence of activities between SMIC and entities of concern in the Chinese military industrial complex,” the Commerce Department said.
Commerce Secretary Wilbur Ross confirmed the move with Fox Business. It was reported first by Reuters overnight. Shares in SMIC, China’s top chipmaker, slid 5.2% on December 18 in Hong Kong on the news.
Other affected Chinese entities include those “that enable human rights abuses, entities that supported the militarisation and unlawful maritime claims in the South China Sea, entities that acquired US-origin items in support of the People’s Liberation Army’s programs, and entities and persons that engaged in the theft of US trade secrets,” according to US government statement.
“There’s plenty in the open press about how DJI has been part of the surveillance state and overall suppression within China,” a senior Commerce official said.
The majority of the newly banned companies are Chinese and will join the likes of Huawei Technologies Co on a list that denies them access to US technology from software to circuitry.
Companies including Huawei and SMIC have been caught in the middle of worsening tensions between the world’s two largest economies, which have clashed on issues from trade to the pandemic.
President Donald Trump had been widely expected to level more sanctions against China’s national champions before Joe Biden formally took office.
Chinese Foreign Minister Wang Yi called the US’s expansive use of sanctions against Chinese companies “unacceptable” in a video address to the Asia Society. He urged the US to stop “over stretching the notion of national security,” and “the arbitrary suppression of Chinese companies.”
Shanghai-based SMIC, a supplier to Qualcomm Inc and Broadcom Inc, lies at the heart of Beijing’s intention to build a world-class semiconductor industry and wean itself from reliance on American technology. Washington in turn views China’s ascendancy and its ambitions to dominate spheres of technology as a potential geopolitical threat. A blacklisting threatens to cripple SMIC’s longer-term ambitions by depriving it of crucial gear.
For US companies exporting items to SMIC for making 10-nanometer or more advanced chips, their applications for a license will face “presumption of denial,” while items for producing chips more mature than 10-nanometer will be reviewed on a case by case basis, according to a senior Commerce official.
Companies exporting parts made outside of the US to SMIC will face certain restrictions depending on how much of their technologies are US-origin, and Washington is talking to “like-minded governments” about forming a unified approach to the Chinese chipmaker, senior Commerce officials said. They declined to give details on which governments the US is talking to and potential implications on non-US companies like ASMl Holding NV and Tokyo Electron Ltd that also supply equipment for making advanced chips.
In response to the widening US crackdown, China is planning to provide broad support for so-called third-generation semiconductors in its next five-year plan to increase domestic self-sufficiency in chip manufacturing, people with knowledge of the matter have said. SMIC is expected to play a central role in that overall effort.
SMIC representatives didn’t respond to requests for comment.