The US Commerce Department has added China's top chipmaker Semiconductor Manufacturing International Corporation (SMIC) to a so-called Entity List that bans it from using US suppliers and technology.
The move to add SMIC to the US entity list is part of the Trump administration's initiative to put additional pressure on Chinese companies in its final weeks.
Commerce Secretary Wilbur Ross said: "We will not allow advanced US technology to help build the military of an increasingly belligerent adversary." Secretary Ross added that SMIC "perfectly illustrates" the risks of China using US technology to modernize its military.
The chipmaker has previously denied its alleged relationship with the Chinese military.
Addition to the Entity List
The addition of SMIC to the list would pose serious problems with the firm, as it relies heavily on US software, machinery and other equipment to design and manufacture its semiconductors.
Smartphone maker and 5G network supplier Huawei, which has been added to the list last year, has seen a significant slow down in its sales.
Under the Entity List designation, US exporters are required to to apply for a license to sell to SMIC. The US Commerce Department explained: "Items uniquely required to produce semiconductors at advanced technology nodes — 10 nanometers or below — will be subject to a presumption of denial to prevent such key enabling technology from supporting China's military-civil fusion efforts."
In response to the decision, a spokesperson for China's Ministry of Foreign Affairs accused the US government of "using its state power to suppress Chinese companies."
At a regular press briefing, spokesperson Wang Wenbin said: "We urge the US to stop its wrongful behavior of unreasonably suppressing foreign enterprises. China will continue to take necessary measures to safeguard the legitimate rights and interests of Chinese enterprises."
Impact on SMIC
Following the announcement, SMIC shares fell by around 5% in Hong Kong and this week, the stock has lost almost 10%, its worst level since September, when talks about possible restrictions on the Chinese chipmaker made its rounds.
SMIC shares dramatically declined following news that the US Department of Defense and other agencies are considering a sanction on exports to the Chinese chipmaker. The decline resulted to a loss of 31 billion Hong Kong dollars from its market value.
During that time, a Reuters report stated that SMIC is being scrutinized for its relationship with the Chinese military.
The report stated that the firm could be added to a list of companies the US government considers to be a threat to American interests. Firms included in the list would find it difficult to purchase vital technology because US firms are banned from selling to them without first obtaining a license to do so.
SMIC warned in October about the possible impact of new US restrictions on key technology on its operations.
In a filing with the Hong Kong Stock Exchange on Sunday, SMIC warned that the US Commerce Department has issued letters to its American suppliers regarding restrictions on dealing with the Chinese firm.
Prior to this, the US government prohibited the chipmaker from supplying troubled tech company Huawei as part of its campaign against the Chinese tech giant’s global business.
