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Trump administration blacklists China’s biggest chipmaker

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The US government has imposed sanctions on China’s biggest chipmaker, Shanghai-based Semiconductor Manufacturing International Corporation (SMIC), in a deliberate blow to the country’s tech industry.

The Financial Times and Reuters reported that the US Department of Commerce has taken action against SMIC, warning that exports to the company pose a risk of being diverted to “military end use”. The decision was based on advice from the Pentagon.

Now that it has been added to the Entity List, companies will require a licence to export to SMIC.

SMIC said: “SMIC reiterates that it manufactures semiconductors and provides services solely for civilian and commercial end-users and end-uses. The company has no relationship with the Chinese military, and does not manufacture for any military end-users or end-uses”. It also said that it has not received any formal notification about the new restrictions.

An SMIC engineer told The Financial Times that while the restrictions were predictable, they were “frightening” for the domestic chipmaking industry. They said that while the company has been developing a “self-sufficient” production line for 40nm chips – and there are reports that it will soon have the capacity to manufacture 7nm chips – the industry is “pessimistic” about its prospects.

The sanctions against SMIC are the latest in a war waged against influential Chinese technology companies by US President Trump, targeting companies like Huawei, Tencent and TikTok owner ByteDance.

Under new restrictions which came into force this month, Huawei has been effectively cut off from chipmakers like Taiwan-based TSMC, which use technology with US origins to manufacture high-end smartphones chips. For instance, Netherlands-based ASML, the world’s only maker of extreme-UV etching machines for manufacturing high-end logic chips, has been prevented from exporting this machinery to SMIC.

In large part due to these restrictions, the Chinese government is reportedly planning a vast boost to its domestic semiconductor industry in the next five-year plan. This effort will focus on third-generation semiconductors and will reportedly be backed by $1tn in investment over the next five years. SMIC is likely to be at the centre of these efforts.

The sanctions will also sting Qualcomm, which uses SMIC to fabricate some of its chips. Analysts believe that Qualcomm is SMIC’s second-largest customer after Huawei.

Paul Triolo, head of tech policy analysis at Eurasia Group, told The Financial Times: “In the worst-case scenario, SMIC is completely cut off, which would severely set back China’s ability to produce chips. This would be a tipping point for US-China relations.”

Following reports that SMIC has been added to the Entity List, Chinese state-owned media has condemned US dominance in the semiconductor industry. An anonymous op-ed in the Global Times called for China to engage in a new “long march” in the tech sector to challenge this dominance.

“The foundation of the entire industry is still in Americans’ hands. For now at least. China must leap from zero to one to provide solid support for the country’s competition with the US,” the op-ed said, according to a Reuters translation.

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