US slaps China’s biggest chipmaker SMIC with sanctions

American companies now require licenses to export products to SMIC

Microchip (Pixabay photo)

Microchip (Pixabay photo)

TAIPEI (Taiwan News) — The U.S. government on Friday (Sept. 25) announced sanctions on China’s biggest chipmaker Semiconductor Manufacturing International Company (SMIC).

In a letter, the U.S. Department of Commerce told American companies in the semiconductor industry that to do business with SMIC and its subsidiaries, a license is now required, the Financial Times reported. The decision was made after it was determined SMIC “may pose an unacceptable risk of diversion to a military end-use in the People’s Republic of China,” the New York Times reported.

The New York Times reported that according to a research report widely circulated within the Trump administration by U.S. defense contractor SOS International, researchers at universities linked to the Chinese military appear to have made extensive use of SMIC’s technologies in their research. The report also suggests that other SMIC customers most likely have connections to the Chinese defense industry.

SMIC has already been impacted by U.S. sanctions on Huawei, prohibiting the company to provide chips to its largest customer, which accounted for a fifth of its revenues, according to the Financial Times.

The latest round of sanctions will also affect U.S. fabless chip designer Qualcomm, which uses SMIC to make some of its chips. According to analysts, Qualcomm is SMIC’s second-biggest customer after Huawei.

China imported more than US$300 billion in computer chips last year, which is more than how much it spent on crude oil, the New York Times cited. While Beijing has focused on becoming self-reliant when it comes to semiconductors, domestic companies like SMIC are years behind Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung.

Even SMIC’s less advanced chips rely heavily on U.S. companies for software and machines. Analysts at the investment bank Jeffries told the New York Times that up to 50 percent of SMIC’s equipment currently comes from U.S. suppliers.

An SMIC spokeswoman on Saturday (Sept. 26) said the company had no relationship with the Chinese military and that its chips are only made for civilian and commercial purposes. SMIC added that it had not yet received any formal notification from the Commerce Department concerning any sanctions.