SMIC has denied any military links.
WASHINGTON, Sept 29 (NNN-AGENCIES) — The US Department of Commerce has written to American suppliers of China’s biggest chip manufacturer, warning them of “unprecedented risks” that their products could be used by the Chinese military.
The letter reminds the firms they must apply for licences to ship controlled items to Shanghai-based Semiconductor Manufacturing International Corporation (SMIC).
But it does not appear that Washington has decided whether or not to add the firm to a trade blacklist.
SMIC has denied any military links, adding that it had not received any formal notice of new restrictions from the US.
But the latest action caused SMIC’s shares to drop about 7% in Hong Kong trade.
The fall followed a steeper decline earlier this month when the Pentagon first revealed it had proposed tougher restrictions against the business, including adding it to the government’s Entity List.
That would prevent any company selling goods or services to SMIC that involved US intellectual property without first getting special permission.
Such a step has already been taken against SMIC’s biggest client – Huawei – which has caused major disruption to the telecoms kit-maker’s business.
Chinese state media had previously reported that SMIC was among many companies that had requested a US licence to continue supplying Huawei.
SMIC was founded in 2000, and has since become the most prominent chip-making foundry in mainland China.
Until recently, it was viewed as being a beneficiary of rising US-China tension because it was expected to benefit from Beijing’s drive to make the country’s tech sector self-sufficient. The firm has raised close to $10bn this year via a share sale and other means to expand its operations.
In addition to Huawei, SMIC’s clients include lesser-known Chinese chip designers including Gigadevice and Unisoc, as well as international companies including Qualcomm and Broadcom.
However, its most advanced products are said to lag two generations behind what rival manufacturers – including Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea’s Samsung – are capable of, because SMIC cannot currently make transistors as small as they can. This means its products are not suitable to be the state-of-the-art processors in the latest smartphones or other advanced gadgets.
The reason for this is in part due to existing restrictions Washington has imposed on the firm. At present, the only way to make the most advanced logic chips is to use equipment made by a Dutch company, ASML. — NNN-AGENCIES
