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US Tightens Exports to China’s Chipmaker SMIC, Citing Risk of Military Use

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The United States has imposed restrictions on exports to China’s greatest chip maker SMIC after concluding there may be an “unacceptable risk” tools equipped to it may very well be used for navy functions.

Suppliers of sure tools to Semiconductor Manufacturing International Corporation will now have to use for particular person export licenses, in response to a letter from the Commerce Department dated Friday and seen by Reuters.

The newest transfer marks a shift in US coverage from earlier this yr, when candidates looking for “military end user” licences to promote to SMIC had been advised by the Commerce Department that the licenses weren’t essential, in response to three folks accustomed to the matter.

SMIC mentioned it had not obtained any official discover of the restrictions and mentioned it has no ties with the Chinese navy.

“SMIC reiterates that it manufactures semiconductors and provides services solely for civilian and commercial end-users and end-uses,” SMIC mentioned.

“The Company has no relationship with the Chinese military and does not manufacture for any military end-users or end-uses.”

SMIC is the most recent main Chinese expertise firm to face U.S. commerce restrictions associated to nationwide safety points or U.S. international coverage efforts. Telecoms big Huawei Technologies had its entry to high-end chips curtailed by its addition to a Commerce Department blacklist generally known as the entity checklist.

“There’s been a lot of coverage on the Trump administration’s actions regarding TikTok, but the more significant action – from a global economic standpoint and that will have considerable ripple effects through global supply chains – are the increasing restrictions on SMIC and other Chinese national champions like Huawei,” mentioned Nicholas Klein, a Washington lawyer who focuses on worldwide commerce. He mentioned these actions are extra probably to attract a retaliatory response from Beijing.

The United States has moved to ban the favored quick video app TikTok, citing nationwide safety considerations stemming from its Chinese possession.

SMIC’s new designation is just not as extreme as being blacklisted, which makes it troublesome to get any export license authorised.

The Pentagon earlier this month, Reuters was first to report, mentioned it was working with different businesses to find out whether or not to blacklist SMIC for its purported hyperlinks to the Chinese navy.

US corporations together with Lam Research, KLA, and Applied Materials, which provide chipmaking tools, might now must get licenses to ship sure items to SMIC.

It is unclear which suppliers obtained the letter, however usually as soon as the Commerce Department involves the conclusion that there’s a threat of navy use or diversion, it sends that info to the businesses.

The Commerce Department’s Bureau of Industry and Security declined on Saturday to remark particularly on SMIC, however mentioned it was “constantly monitoring and assessing any potential threats to U.S. national security and foreign policy interests”.

The administration has more and more educated its concentrate on Chinese corporations that bolster Beijing’s navy. Last month, the United States blacklisted 24 Chinese corporations and focused folks it mentioned had been a part of development and navy actions within the South China Sea, its first such sanctions in opposition to Beijing over the disputed strategic waterway.

© Thomson Reuters 2020

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