U.S. May Blacklist China’s Chipmaker SMIC

Semiconductor Manufacturing International Corp. (SMIC) said it is shocked and perplexed by a report that the U.S. government may blacklist the company.

The administration of U.S. President Donald Trump is considering whether to add China’s largest chipmaker to a trade blacklist, Reuters reported, citing an unidentified Defense Department official.

As the U.S. escalates its crackdown on Chinese companies, the Department of Defense has been working with other U.S. agencies on a decision that would force U.S. suppliers to seek a stringent license before shipping to the company, the report said.

SMIC strictly complies with the laws and regulations of all jurisdictions where it does business, the company said in a statement on its website. The company makes chips and provides services solely for civilian and commercial customers and end uses, the statement said.

“Any assumptions of the company’s ties with the Chinese military are untrue statements and false accusations,” SMIC said in the statement. “The company is in complete shock and perplexity to the news. Nevertheless, SMIC is open to sincere and transparent communication with the U.S. government agencies in hope of resolving potential misunderstandings.”

Last week, the Pentagon proposed placing SMIC on the U.S. government’s Entity List with the End User Committee, a panel led by the Commerce Department that also includes the State and Energy Departments, the Reuters report said, citing a person familiar with the matter.

U.S. companies including Lam Research, KLA Corp and Applied Materials are among key suppliers of chipmaking equipment that could be impacted by a potential entity listing.

In July, Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest chip foundry, said a ruling from the U.S. Department of Commerce to halt TSMC’s sales to China’s Huawei will probably crimp demand during the rest of this year.

At the time, TSMC said it was optimistic that the U.S. government would relax its restrictions on chipmakers that use U.S. equipment and design tools to supply semiconductors to Huawei subsidiary HiSilicon, which has been blacklisted by the Trump administration.

TSMC has not taken any new orders from Huawei since May 15 this year, and it doesn’t plan to ship any silicon wafers made for the Chinese telecom giant after Sept. 15. As of May, Huawei accounted for about 15 percent of TSMC’s overall sales.

The Trump administration has increasingly focused on Chinese companies that support Beijing’s military, Reuters said. Last month, the U.S. blacklisted 24 Chinese companies and targeted individuals it said were part of construction and military actions in the South China Sea, its first such sanctions against Beijing over the disputed strategic waterway, according to the report.

The U.S. Department of Defense has released two lists of Chinese companies in the past few months that it says are owned or controlled by China’s People’s Liberation Army, Reuters said. The designation gives President Trump the authority to place them on an even tougher blacklist, but so far no action has been taken, according to the report.

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