Leading Chinese Chipmaker SMIC hit by US export restrictions

SMIC said in a statement on Sunday night that the US Bureau of Industry and Security (BIS) has informed some of SMIC’s suppliers to further limit exports of US equipment, accessories and materials to the company. Exports will require a permit.

SMIC said in the statement that the company has undertaken “preliminary exchanges” with the U.S. Bureau of Industry and Security regarding export restrictions. The Company is conducting assessments on the relevant impact of such export restrictions on the company’s production and operation activities, it said. SMIC also said it has been operating in compliance with the relevant laws and regulations of all jurisdictions where it performs its businesses.

As per media reports, the Bureau of Industry and Security under the US Department of Commerce had issued letters in September informing certain companies they must henceforth obtain a licence before continuing to supply goods and services to SMIC. The letter stated that exports to SMIC “may pose an unacceptable risk of diversion to a military end use” to China.

The fresh sanctions on SMIC come after the Trump administration imposed penalties on a broad range of China’s tech companies. Analysts say, China may also release an ‘unreliable entity list’ in response to US actions. In September, China’s Ministry of Commerce announced rules for its list of ‘unreliable entities’ to curb the operations of foreign companies deemed “unreliable”. Chinese Foreign Ministry has previously declared its opposition to US sanctions on Chinese companies.

SMIC rely heavily on equipment from companies based in the United States and other relevant countries to produce chips for clients. Earlier this year, SMIC issued one of the biggest Initial Public Offers in Shanghai Stock market, aiming to use the cash to kickstart manufacturing into more advanced technology. In its statement, the company has advised shareholders and potential investors to exercise caution when dealing in the securities of the Company.

This sanction may further hit Huawei, already under US sanctions, as it may be difficult for SMIC to supply chips to it. The sanctions may also affect US companies Intel and Qualcomm that uses SMIC to fabricate some of its chips. Analysts believe that Qualcomm is SMIC’s second-largest customer after Huawei.

Report by Anshuman Mishra/ Beijing


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