US adds China’s largest chipmaker to export blacklist

Washington: The Trump administration has placed Semiconductor Manufacturing International Corporation and DJI, the drone manufacturer, on an export blacklist, raising tensions with China as Joe Biden prepares to take office.

SMIC and DJI are among dozens of Chinese companies that were placed on the commerce department’s “entity list” on Friday. A commerce department official said SMIC was added to the list — which requires US companies to get licenses to sell equipment and technology to the company — because of concern that it chips were used in products for the Chinese military.

The official said DJI, the world’s biggest drone manufacturer which has dominant market share in the US, had been added to the list because its drones were used to enable human rights abuses in China and elsewhere.

The actions will force any American suppliers to obtain a US government licence before selling to the companies — mirroring the export restrictions in place for other Chinese technology companies such as Huawei and Hikvision, the surveillance camera manufacturer.

“Between SMIC’s relationships of concern with the military industrial complex, China’s aggressive application of military civil fusion mandates and state-directed subsidies, SMIC perfectly illustrates the risks of China’s leverage of US technology to support its military modernisation,” Wilbur Ross, the US commerce secretary, said in a statement on Friday.

SMIC was one of more than 60 “entities” that were added to the commerce department’s export blacklist, which is run by the Bureau of Industry and Security.

The commerce department said the sweeping action included “entities in China that enable human rights abuses, entities that supported the militarization and unlawful maritime claims in the South China Sea, entities that acquired US-origin items in support of the People’s Liberation Army’s programs, and entities and persons that engaged in the theft of US trade secrets”.

A day earlier, global index provider MSCI said that it would delete SMIC’s shares from its benchmark equity indices, which are followed by trillions of dollars of funds, because of the group’s alleged ties to China’s military.

SMIC has previously been subjected to US trade restrictions blocking the export of certain controlled items under rules concerning military end users.

“Adding the company to the entity list would have a much bigger impact because it would impose a licensing requirement on a far wider range of US-controlled goods, technology and software,” said Nicholas Turner, a Hong Kong-based compliance lawyer at Steptoe & Johnson.

SMIC is a crucial plank in Beijing’s plan for semiconductor self-sufficiency. This year, it raised $7.6bn in an initial public offering on Shanghai’s tech-focused Star market, in what was the onshore Chinese market’s biggest share sale in a decade.

—The Financial Times Limited 2020