Sanction of SMIC by the US Department of Commerce – the Trump administration’s new step against Huawei’s supply chain

Sanction of SMIC by the US Department of Commerce – the Trump administration’s new step against Huawei’s supply chain

Sanction of SMIC by the US Department of Commerce – the Trump administration’s new step against Huawei’s supply chain The United States is trying to apply pressure and escalation The trade war against China has once again taken its toll on Chinese tech companies. The target of the Trump administration this time is the semiconductor manufacturing company SMIC, which is part of the supply chain of Huawei. is considered. Reuters news agency, referring to a letter from the US Department of Commerce dated September 25, 2020 (October 4, 2019), from requiring American companies to obtain a license from the US government before supplying the raw materials needed to China’s largest chip manufacturer reported. The reason for this decision, as stated by the American side, is the “unacceptable risk” regarding the possibility of using SMIC chips in China’s military industry.

In the meantime, according to the testimony of some industry activists who have previously inquired about the sale of products to SMIC from the US Department of Commerce, the managers of this ministry had not mentioned the sales limit and the need for a license before. And the decision appears to be the result of the latest roundup of US trade officials.

Of course, at this stage, mild restrictions have been imposed on the trade of American companies with SMIC, and the severity of the Trump administration’s actions with Putting Huawei’s name on the commercial blacklist is in no way comparable. However, the US is said to be considering tougher measures against the Chinese chipmaker, possibly including being placed on the Entity List. The performance history of the American government managers indicates that limiting the activities of Chinese companies is done gradually. For example, the embargo against Huawei was gradually implemented and then From the creation of trade barriers, it was finally fully implemented with the official announcement of the Ministry of Commerce to prohibit the access of the Chinese giant to the American supply chain. Now there is a fear for SMIC that it will end up on the black list of the American government. In response to this news, the Chinese company has emphasized in statements that it has nothing to do with the Chinese army and only produces semiconductors and provides services to end users and civilian and commercial uses.
According to Nicholas Klein, an international trade expert who practices law in Washington, while the Trump administration’s move to ban TikTok has been widely publicized, from an economic perspective and its implications On global supply chains, increasing restrictions against SMIC and other top Chinese companies such as Huawei will have more serious effects. From his point of view, the imposition of sanctions against these companies increases the possibility of China’s retaliatory reaction against America.

Reuters has already published news in early September this year about the US Department of Defense’s efforts to work with other US agencies and departments to blacklist SMIC for alleged cooperation with the Chinese military. Was. Now, in the first step, companies that supply equipment and materials needed to make chips, including Lam Research, KLA Corp and Applied Materials, must obtain a license to supply their products to this Chinese company.

It is not yet clear exactly which suppliers received the letter related to the new regulations, but as noted, as is standard practice at the US Department of Commerce, such guidance will be issued after the matter is summarized in It is at the discretion of the cooperating parties. A few days before the publication of this news, the US Department of Commerce’s Industry and Security Administration, while refusing to comment explicitly on SMIC, stated that it is “continually monitoring and evaluating any threats to the national security and foreign policy interests of the United States.”

In fact, American government managers have increasingly focused on the performance of those Chinese companies that strengthen the military sector of this country’s government; Last month, the US Department of Commerce blacklisted not only 24 Chinese companies, but also individuals it claimed were linked to military actions in the South China Sea. This is the first case of applying restrictions related to the strategic conflict in this waterway against Beijing.

According to analysts, this action of the US government will increase the pressure on China’s semiconductor industry and gradually other companies related to this chain will be targeted. It is natural that the Chinese government will not be happy about the matter. In this regard, the spokesperson of the Chinese Foreign Ministry has accused the United States of coercion and added that “what has been done is a serious violation of international trade rules and will undoubtedly harm the interests of the United States and the image of this country.” Analysts at Jefferies Financial Group estimate that about half of SMIC’s equipment is of American origin, and the $29 billion company works with most of the top US chipmakers, including Qualcomm and Broadcom.

In fact, the root of the new laws should be found in the US government’s confrontation with Huawei. The massive effort to curb the Chinese giant, which began in mid-May 2019, prompted the Trump administration to restrict the company’s use of American supply chains. In this regard, Huawei was given only until September 15 to use the chips produced by TSMC, the largest independent chip manufacturer in the world. The main reason for this limitation is the presence of American technology in the processes of the Taiwanese company. This prompted Huawei to turn to the local company SMIC to supply the parts it needs; A manufacturer that is currently manufacturing the 14nm Kirin 710A chipset with Huawei cooperates. Of course, the Chinese chipmaker is far away from Taiwan’s TSMC in terms of production technology, however, Trump’s managers have taken the initiative to prevent Huawei from succeeding in this new strategy and by imposing restrictions on SMIC, they are trying to bring the Chinese company’s solution to a dead end.

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