USA adds China’s top chipmaker to list of companies that American money can’t legally buy

The United States Department of Defense has added China’s top chipmaker, Semiconductor Manufacturing International Corp. (SMIC) to the list of “Communist Chinese military companies” in which US investors are not permitted to hold or trade shares.

The department’s announcement says it is “determined to highlight and counter the People’s Republic of China’s (PRC) Military-Civil Fusion development strategy, which supports the modernization goals of the People’s Liberation Army (PLA) by ensuring its access to advanced technologies and expertise acquired and developed by even those PRC companies, universities, and research programs that appear to be civilian entities.”

SMIC’s foundries are now capable of producing 14nm devices, but it also advertises itself as offering mature manufacturing capabilities for 28nm, 40nm and larger-scale silicon. Huawei is one of SMIC’s key customers.

SMIC called a trading halt on the Hong Kong Stock Exchange before issuing a statement [PDF] that strongly refuted the Department’s arguments and said the action wouldn’t trouble it in the slightest.

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“There is no major impact on the Company’s operation after being added to the Chinese military companies list,” the statement says. “The Company strongly opposes the decision of United States Department of Defense, which reflects a fundamental misunderstanding by the United States Department of Defense regarding the end-uses of the Company’s business and technology.”

SMIC’s listing by the DoD means it now falls under president Trump’s Executive Order on Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies that US entities can’t buy or trade SMIC shares.

The USA has already added SMIC to the Entity List of companies to which US companies are forbidden to export without a licence. US authorities have also warned local providers of chip-making equipment that their products will likely end up in the hands of China’s military.

The Chinese company therefore ended its statement by saying, in bold text, “Shareholders and potential investors are advised to exercise caution when purchasing or selling shares of the Company.”

China’s US embassy appears not to have commented on the situation at the time of writing. Investors sent SMIC shares down 2.5 percent.

The new DoD list [PDF] also includes Chinese oil, construction, and engineering companies. The four new listed companies join 31 on previous versions of the list and again demonstrate the USA’s intention to make life hard for China. ®

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