silicon wafer

SMIC and DJI join Huawei on US blacklist

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The United States Department of Commerce has updated its Entity List with the addition of dozens of Chinese companies alleged to be undermining US national security and international interests, including China’s largest chipmaker and the world’s largest drone manufacturer.

According to a statement from the department, the 77 Chinese companies include those which enable human rights abuses, enable the production of advanced weapons systems, and commit trade theft.

“[The department] will act to ensure that America’s technology – developed and produced according to open and free-market principles – is not used for malign or abusive purposes,” said Commerce Secretary Wilbur Ross, in a statement.

Drone manufacturer DJI, which accounts for approximately 70 per cent of the consumer drone market, is among the companies added to the list. Use of DJI products has been strongly restricted within the US military since 2017.

The most notable new addition to the list is Shanghai-based Semiconductor Manufacturing International Corporation (SMIC), China’s largest and most sophisticated chipmaker. The US government has accused the company of working with the country’s military; SMIC maintains that it manufactures semiconductors and provides services “solely for civilian and commercial end-users and end-uses” and that it has no relationship with the military.

SMIC has been evaluating the possible impacts of its blacklisting for months, with its addition to the list coming as no surprise to the industry.

The Entity List restricts the sales of goods and services subject to blacklisted companies, organisations, and individuals. US companies will require a licence to work with these entities. In the case of SMIC, the company will be subjected to an extra provision: technology required to design and make semiconductors using a 10nm process or smaller will be subject to a “presumption of denial” over concerns that it may be used to support China’s military.

SMIC has been making efforts to catch up with its rivals and move past the 14nm process, recently announcing the development of its own 7nm process. Its addition to the Entity List casts uncertainty over its future manufacturing these sophisticated products.

The addition of SMIC to the Entity List comes as a further blow to Shenzhen-based Huawei, which is perhaps the highest-profile name on the list. Tightened US restrictions against Huawei have largely cut off its supply of chips not just from US companies but also from TSMC, the world’s largest contract chipmaker.

With access to the world’s most sophisticated silicon heavily restricted, Huawei is pinning its hopes on the domestic chipmaking industry, which is likely to get a boost in China’s next five-year plan.

Meanwhile, Reuters is reporting that US lawmakers are to back a $1.9bn fund to support the removal of telecommunications equipment alleged to pose a national security threat, as part of its $900bn Covid-19 relief package.

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