Last weekend, the US Department of Defence added China’s biggest computer chipmaker SMIC to a list of ‘Chinese military companies’, hence putting pressure on the company. This means that US investors are now blocked from holding or trading shares in SMIC.
This order was signed by President Donald Trump in November, which aims to prevent US capital from funding China’s military.
Yet, SMIC still denies any military links.
Moreover, SMIC declared that some of its US suppliers received letters about new export restrictions, suggesting that the company could also be added to the US trade blacklist. This would have major consequences on the chip production, as SMIC is dependent on sourcing from US companies for it to manufacture silicon chips. Therefore, it puts the business in the total control of the Department of Commerce.
The company’s addition to the ‘Chinese military companies’ only makes it more difficult to get a license and would result in reduced demand for its shares seeing as US investors won’t be able to buy them.
This shows that the Trump administration aims to use its final days to continue to put pressure on China and establish a hard-line policy for the new administration.
SMIC is the major chip-making foundry in China, although its most advanced products are behind new rival manufacturers’ ones. SMIC can’t make transistors as small as those made by its rivals, and so it is impossible for the company to produce state-of-the-art processors for the latest tech. Part of this is due to the existing restrictions the US has enforced on the firm.