US Takes On China’s Largest Chip Manufacturer SMIC, Blacklists The Company

The United States has added SMIC which makes China’s largest chip chip in the list of “Chinese military companies”, putting further pressure on the company.

The Department of Defense’s move means that American investors are now barred from owning or trading SMIC shares.

Why The SMIC Is Under Pressure?

It said the Chinese government was using the technology of “non-governmental organizations”, such as companies and universities, to develop military skills.

SMIC has denied any military connections.

The company is now under a presidential directive signed by President Donald Trump in November, which sought to prevent the US capital from supporting the modernization of Chinese troops.

Earlier SMIC said some of its American suppliers had been issued with letters informing them that they would be subject to new export restrictions.

Impact On Chip Production

This suggests that the US Department of Commerce can add a company to its black trade list, known as a entity listing, although it has not yet made such a decision.

When that happens, it can have a profound effect on chip production.

“Recognizing that SMIC relies on acquiring US companies to manufacture silicon chips, this puts the SMIC business in the hands of the Department of Trade, which may decide to issue licenses in various cases,” said Richard Windsor, founder of research firm Radio Free Mobile.

“The additional appointment of SMIC as a commander or commander by the Chinese military does not change the situation, without making it difficult to obtain a license, making it more likely to be added to the list of businesses and leading to a reduction in its demand for stocks as American investors can no longer afford them.”

This is another indication that the Trump administration intends to use its last days to continue to pressure China and try to lock up a hard line policy for Biden’s incoming administration.

The definition of what it means to support the military can be widely interpreted and open to debate – but Washington is using it boldly in the chips war – an important area of ​​technical competition.

Washington knows this is a place where China is lagging behind and wants to find out.

The Trump administration will also rely on it to make it harder for Biden’s management to appear to back down from action for fear of being accused of being “soft” in Beijing.

The Limitations

SMIC was founded in 2000, and has become the most prominent chip manufacturing base in China.

However, its most advanced products are said to be two generations behind what rival manufacturers – including Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung of South Korea – know.

SMIC is currently unable to make transistors as small as those competitors, and therefore cannot produce state-of-the-art processors for the latest smartphones and other advanced gadgets.

The reason for this, in part, is due to the US restrictions imposed on the factory.

Currently, the only way to make high-quality logic chips is to use equipment made by a Dutch company, ASML.

SMIC had ordered a $ 150m (£ 111m) lithography machine – which uses lasers focused on large mirrors to print small patterns on silicon – at ASML in 2018. But Reuters reported that the White House had confirmed that the Dutch government had banned exports for security reasons.

An ASML spokesman declined to comment when asked by the BBC if the agreement was still on the wall.

SMIC told the BBC: “SMIC produces semiconductors and provides services to end-to-end and end-of-life workers. The company has no ties to Chinese military and does not make anyone military or end-to-end.”

Shaheer is passionate about living a life seeking un-ending knowledge, philomath, as you may think of him. He's a student of Finance and a keen observer of Business and Indian-Political scenario who takes pleasure to pen down his views and opinions on the same. As his guiding mantra to life, ‘Come what may , life goes on’ helps.

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