What was speculated about in the past weeks has become a reality. The US Department of Commerce has blacklisted China's largest chip maker, Semiconductor Manufacturing International Corporation (SMIC), making it impossible for US companies to do business with it. If they want to do business with it now, they will have to apply to the ministry for individual export licenses, which the office will only issue in rare cases, according to Reuters and the Wall Street Journal. The decision will put smartphone giant Huawei in even more trouble.
The Ministry of Commerce justifies the move by saying that SMIC's technology could be used for the purposes of the Chinese military. He claims this based on the statements of the supplier of the US Department of Defense, the company SOS International, according to which the Chinese chip giant cooperated with one of the largest Chinese firms in the defense industry. In addition, university researchers connected to the military are said to be proposing projects based on SMIC technologies.
SMIC is the second Chinese high-tech company added to the so-called Entity List after Huawei. While the ramifications of its inclusion on the list won't be clear until the ministry decides who (if anyone) will get a license, the ban could have major adverse effects on China's tech industry as a whole. SMIC may have to resort to non-US technology if it wants to improve its manufacturing or maintain hardware, and there is no guarantee that it will find what it needs.
The ban could have a knock-on effect on businesses that depend on SMIC. Huawei needs the Shanghai colossus in the future for the production of some Kirin chips - especially after it lost its main supplier TSMC due to tightened sanctions, and may have further problems if SMIC cannot meet its demand in the new situation, writes Endgadget website.
