Tensions between the U.S and China are heating up as Washington threatens to ban yet another Chinese company. China’s largest chipmaker, Semiconductor Manufacturing Corporation, is the latest to find itself at crossroads amid spiraling relations between the two tech and economic powerhouses.
Entity List Designation
The U.S Department of Defense is in discussions over the possibility of adding the chipmaker into the Commerce Department Entity List. The list currently contains over 300 Chinese companies. The addition restricts such companies from receiving specific goods made in the United States. If added, any exports that SMIC makes into the U.S would undergo vigorous review, something that could see them curtailed significantly.
The addition comes amid allegations by U.S officials that most Chinese companies pose national security dangers to U.S citizens. The fact that SMIC chips are at the heart of powering sensitive devices such as phones, servers, and computers explains why they continue to elicit national security concerns.
In the recent past, the U.S has complained that Chinese tech companies are being used by the Chinese government to collect information on behalf of the People’s Liberation Army. SMIC finds itself in hot water with U.S authorities after a report by SOS international indicated that it has close ties with China’s defense sector.
The report indicated that Chinese military researchers use SMIC technology to manufacture chips. SMIC has had to come out fighting, reiterating that any company ties to the Chinese military are untrue statements.
The mounting pressure on SMIC comes at a time when Beijing is trying to boost its domestic semiconductor industry. A fierce trade war with the U.S last year prompted Beijing to change the way it operates all in the effort of becoming self-reliant.
Whiles SMIC ranks among the top 5 semiconductor companies in the world, its technology lags behind that of chip manufacturers in Taiwan and the United States. Beijing has opted to pour billions of dollars into the industry, all in the effort of strengthening SMIC’s competitive edge in the industry.
SMIC has already received generous government support in the form of low interest loans, tax breaks, and investments to build manufacturing facilities. However, the company is still reliant on U.S software and manufacturing equipment to make chips.
U.S vs. China Tech War
Should the U.S move forth and impose export bans on SMIC, Beijing is sure to hit back. A number of U.S chip makers could also come under scrutiny from Beijing. For instance, Beijing could also impose bans on U.S companies that sell chips to Chinese companies. The current stand-off threatens to blow out into a full-blown tech war.
The U.S has already rattled China on tightening restrictions on Huawei Technologies’ other Chinese Tech heavyweights that have taken the tech world by storm in recent years. Currently, Huawei cannot sell its products in the U.S, let alone obtain semiconductors without a special license.
ByteDance is another Chinese company at crossroads as tensions between the U.S and China escalate. The company has been asked to accept the acquisition of its viral video-sharing app TikTok to a U.S company in 45 days over national security concerns.