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US Sanctions to Curb Operations of China's Largest Chipmaker SMIC: Report

Darab Ali
·1-min read

The US government has put sanctions on China’s largest smartphone chipmaker, Shanghai Manufacturing International Corporation (SMIC), dealing further blow to Chinese companies with business dealings in the United States. On Friday, September 25, the US Department of Commerce told American companies that exports to SMIC posed an ‘unacceptable risk’ of being diverted to ‘military use,’ according to a copy of the letter seen by the Financial Times. The move threatens to cut off SMIC from crucial US software and chipmaking equipment, depriving the company of vital business. Companies will now require licenses to export products to SMIC.

SMIC has already lost business with its biggest customer Huawei due to US sanctions. The chipmaker had warned of similar sanctions in its IPO prospectus in July. The sanctions are also said to effect US chipmaker Qualcomm, which relies on SMIC to fabricate some of its chips. Qualcomm is said to be SMIC’s second largest customer after Huawei. China has previously declared its opposition to US sanctions on Chinese companies. Last weekend, China’s Ministry of Commerce announced that it will curb the operations of foreign companies deemed “unreliable.”

The Financial Times reported that SMIC today said the company was not yet aware of the new sanctions, and was looking into the situation. It also said that it is continuing to engage with the US Department of Commerce. The company was quoted as saying that it “has no relationship with the Chinese military, and does not manufacture for any military end-users or end-uses.”

The US Department of Commerce did not immediately respond to FT’s request for comment.