The United States of America has added Semiconductor Manufacturing International Corporation (SMIC), China’s biggest chip-maker, to a list of ‘Chinese military companies.’ This adds more pressures on the company. This move from the US Department of Defense means that US investors are now forbidden to hold or trade shares in SMIC. It is said that the Chinese government was using the ability of ‘civilian entities’, such as universities and companies in order to modernize their military capabilities. However, SMIC disputed any military relations.
China’s biggest chip-make is now under an executive order that is signed by President Donald Trump in November. This is proposed to prevent the US capital from funding the modernization of China’s military. Previously, according to SMIC, letters made some of their US suppliers getting issued. The letters also said that the suppliers will be subject to new export restrictions. This shows that the US Department of Commerce probably adds the chip-maker company to its trade blacklist, which is also known as the entity list. However, such a decision has not been published yet.
It could cause an impact on chip production if such a decision happens. The founder of research firm Radio Free Mobile, Richard Windsor, said that this current restriction places the SMIC to the hands of the US Department of Commerce, given the thought that the Chinese company relies on resources from US companies to be capable of producing silicon chips. He also added that the additional designation of the Semiconductor Manufacturing International Corporation as being controlled or owned by the Chinese military does not change any situation besides make it more difficult to have a license and make it more possible to get added to the list of entities.
This restriction is like another sign that the Trump administration wants to maximize their final days to keep increasing pressures on China. It is also a sign that they give it a try to lock a hard-line policy for the approaching Biden administration. It is open to argue and interpret about the definition of what supports the military. However, it is utilized by Washington as a lever in the battle over chips, which is a key field of technological competition.
China is relatively behind in this one area and Washington knows that. China is also desperate to catch up. The Trump administration will be also relying on it being difficult for the Biden administration to be seen to cancel measures for fear of being accused of going “soft” on Beijing.
Since it was founded in 2000, SMIC has been the most leading chip-maker company in mainland China. But, the company’s most sophisticated products are said to be left 2 generations behind what its competitors are capable of, including TSMC or Taiwan Semiconductor Manufacturing Company and South Korea’s Samsung. Currently, SMIC is not able to manufacture transistors as small as those are made by its rival manufacturers.
So, SMIC cannot produce advanced processors for the newest smartphones and other sophisticated gadgets. The reason for this is partly due to the existing restrictions that the United States of America has applied to the company. Right now, the only way to produce the most sophisticated logic chips is by using equipment that is made by a Dutch company, ASML. SMIC has ordered a lithography machine that values $150 million or £111 million.
The lithography machine uses lasers in 2018. However, Reuters reported that the White House managed to convince the Dutch government to block the export for security reasons. A spokesman for the Dutch company, ASML, refused to make any statements when the BBC asked whether the deal was still in limbo. “SMIC manufactures semiconductors and provides services solely for civilian and commercial end-users and end-uses.” SIMC also told BBC that they had nothing to do with the Chinese military nor manufacture any military weapons.
SMIC claimed that they were completely shocked and confused after the Pentagon revealed that it had proposed the company to be added to the government’s blacklist. This restriction would restrict suppliers from providing the company with American-based technology without special permission. Moreover, the stock of the Semiconductor Manufacturing International Corporation sank after this event. This is why Beijing said that it totally opposed such a decision from the US government. A spokesman from a ministry even accused Washington of bullying and using security concerns to break trade rules. What do you think about this current event?