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US blacklist rumour sends SMIC tumbling on stock market

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Shares in Shanghai-based chipmaker Semiconductor Manufacturing International Corp (SMIC) have plummeted almost 23 per cent on the Hong Kong Stock Exchange today, following reports that US President Donald Trump is planning to blacklist the company.

Amid the ongoing trade war between the US and China, the Trump administration has focused many of its most aggressive attacks on influential Chinese technology companies such as Huawei, WeChat, TikTok and ZTE.

According to reports from Reuters and other news organisations, the US Department of Defense and other US agencies are considering attempting to cripple SMIC by adding it to the 'Entity List', which already contains more than 275 Chinese companies alleged to be working against the interests of the US.

The addition of SMIC to the list would force US companies to seek extremely difficult-to-obtain licenses to work with the company, effectively preventing it from using technology with US origins. This would be devastating for SMIC and other semiconductor manufacturing companies, which heavily depend upon technology with US origins.

Reuters reported that SMIC’s relationship to the Chinese military is under scrutiny within the Trump administration.

The company said in a filing to the Hong Kong Stock Exchange that it manufactures silicon “solely for civilian and commercial end-users and end-uses” and that it has no relationship whatsoever with the Chinese military.

“Any assumptions of the company’s ties with the Chinese military are untrue statements and false accusations,” SMIC posted on social media and messaging platform WeChat this weekend. “The company is in complete shock and perplexity to the news. Nevertheless, SMIC is open to sincere and transparent communication with the US government agencies in hope of resolving potential misunderstandings.”

SMIC is China’s largest chip manufacturer. With supplies of chips from other chipmakers like TSMC cut off by US restrictions, seriously disrupting its consumer and enterprise businesses, tech giant Huawei has been working with SMIC to manufacture its Kirin chipsets. However, the foundry does not currently have the capacity to produce the state-of-the-art silicon found in Huawei’s luxury smartphones.

The news has wiped HKD 31bn (£3bn) off SMIC’s market value - almost 23 per cent.

Last week, it was reported that the Chinese government is preparing a set of policies to bolster its domestic semiconductor industry in the next five-year plan with hundreds of millions of dollars in investment, countering US restrictions and establishing itself as a more independent technological superpower. Bloomberg News reported that the priority that will be placed on boosting the industry will be comparable to the vast effort previously placed on building China’s nuclear capacity.

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