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

The United States has imposed restrictions on exports to China’s largest chip maker SMIC after concluding there’s an “unacceptable risk” gear provided to it might be used for army functions.

Suppliers of sure gear to Semiconductor Manufacturing International Corporation will now have to apply for particular person export licenses, in accordance to a letter from the Commerce Department dated Friday and seen by Reuters.

The newest transfer marks a shift in US coverage from earlier this yr, when candidates looking for “military end user” licences to promote to SMIC have been instructed by the Commerce Department that the licenses weren’t obligatory, in accordance to three folks conversant in the matter.

SMIC mentioned it had not acquired any official discover of the restrictions and mentioned it has no ties with the Chinese army.

“SMIC reiterates that it manufactures semiconductors and provides services solely for civilian and commercial end-users and end-uses,” SMIC mentioned.

“The Company has no relationship with the Chinese military and does not manufacture for any military end-users or end-uses.”

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

“There’s been a lot of coverage on the Trump administration’s actions regarding TikTok, but the more significant action – from a global economic standpoint and that will have considerable ripple effects through global supply chains – are the increasing restrictions on SMIC and other Chinese national champions like Huawei,” mentioned Nicholas Klein, a Washington lawyer who makes a speciality of worldwide commerce. He mentioned these actions are extra possible to draw a retaliatory response from Beijing.

The United States has moved to ban the favored quick video app TikTok, citing nationwide safety issues stemming from its Chinese possession.

SMIC’s new designation will not be as extreme as being blacklisted, which makes it tough to get any export license accredited.

The Pentagon earlier this month, Reuters was first to report, mentioned it was working with different businesses to decide whether or not to blacklist SMIC for its purported hyperlinks to the Chinese army.

US corporations together with Lam Research, KLA, and Applied Materials, which provide chipmaking gear, might now want to get licenses to ship sure items to SMIC.

It is unclear which suppliers acquired the letter, however usually as soon as the Commerce Department comes to the conclusion that there’s a threat of army use or diversion, it sends that info to the businesses.

The Commerce Department’s Bureau of Industry and Security declined on Saturday to remark particularly on SMIC, however mentioned it was “constantly monitoring and assessing any potential threats to U.S. national security and foreign policy interests”.

The administration has more and more skilled its give attention to Chinese corporations that bolster Beijing’s army. Last month, the United States blacklisted 24 Chinese corporations and focused folks it mentioned have been half of development and army actions within the South China Sea, its first such sanctions in opposition to Beijing over the disputed strategic waterway.

© Thomson Reuters 2020

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