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US sanctions on China’s SMIC have exceptions that limit effectiveness

American lawmakers call for tougher restrictions on Chinese semiconductor firm

SMIC logo (SMIC website)

SMIC logo (SMIC website)

TAIPEI (Taiwan News) — Washington’s latest move to restrict China’s largest chipmaker Semiconductor Manufacturing International Corp's (SMIC) access to advanced manufacturing technology comes with some caveats that could influence the effectiveness of sanctions.

Last Friday (Dec. 18), the U.S. Department of Commerce added SMIC to the Entity List over its alleged links to the Chinese military, an accusation the company has denied. The designation is meant to limit SMIC’s ability to obtain certain U.S. technologies by requiring American exporters to apply for a special license to export to the Chinese tech firm.

“Items uniquely required to produce semiconductors at advanced technology nodes — 10 nanometers or below — will be subject to a presumption of denial to prevent such key enabling technology from supporting China’s military-civil fusion efforts,” the Commerce Department said.

The problem is that the chips SMIC currently makes and sells are usually larger than 10 nm and are therefore not covered by the new restrictions, according to The Wall Street Journal (WSJ). In addition, the latest sanctions do not include more versatile tools that can be used to manufacture older technology as well as more advanced chips.

Some tools that can handle less advanced 14-nm chipsets can also produce 7-nm ones, Handel Jones, chief executive of research firm International Business Strategies Inc., told WSJ. In response, Senator Marco Rubio and Representative Michael McCaul in a letter on Monday (Dec. 21) called on Commerce Secretary Wilbur Ross to rewrite the restrictions to close “dangerous loopholes” that would let SMIC continue their operations without interruption.

The pair expressed concern in their letter, saying the company's inclusion on the Entity List had been “done for show and parochial commercial interests at the expense of U.S. national security.” In response, the Commerce Department said it could revisit the SMIC restrictions, adding: “We are prepared to take such action and amend the entity listing.”

SMIC said in a regulatory filing on Sunday (Dec. 20) that the listing would not have an adverse effect on its short-term operations or finances but that it would damage its work on more advanced chips. In anticipation of the U.S. sanctions, SMIC has been stockpiling as much as 18 months’ worth of raw materials and chemicals to keep operations running, according to Bloomberg.

Updated : 2022-05-29 17:46 GMT+08:00