The US Department of Commerce has written to US suppliers of China’s largest chipmaker, warning them of “unprecedented risks” that their products could be used by the Chinese military.
The letter reminds companies that they must apply for licenses to ship items checked at the Shanghai SMIC.
But it doesn’t appear that Washington has decided whether or not to add the company to a commercial blacklist.
The SMIC denied any military link.
And he said he had not received any formal notice of further restrictions from the United States.
But the latest move brought shares of Semiconductor Manufacturing International Corporation down about 7% in Hong Kong trading.
The drop followed a steeper drop earlier this month when the Pentagon first revealed it had proposed stricter restrictions on the company, including adding it to the list of government entities.
This would prevent any company from selling goods or services at minimum wage involving US intellectual property without first obtaining special authorization.
Such a step has already been taken against the biggest customer of the SMIC – Huawei – which caused a major disruption in the activity of the manufacturer of telecom kits.
requested a US license to continue supplying Huawei.
But an industry analyst suggested that the latest ruling indicated the United States was increasingly focused on the minimum wage itself.
“The denial of US semiconductor manufacturing equipment would put the minimum wage at a disadvantage because most of this technology comes from US sources,” said Jim Tully.
“China might aim to become self-sufficient in these technologies in the longer term, but it seems to me that it would take more than 10 years to achieve that.
“And in the short term, the equipment and associated software that SMIC already uses still needs ongoing support and maintenance from its producers. “
This has led to speculation that the survival of the minimum wage may now be at stake.
SMIC was founded in 2000 and has since grown into the largest chipmaking foundry in Mainland China.
Until recently, it was seen as a beneficiary of growing tension between the United States and China, as it was believed to benefit from Beijing’s drive to make the country’s tech sector self-sufficient.
The company has raised nearly $ 10 billion (£ 7.7 billion) this year through a sale of shares and other means to expand its operations.
Besides Huawei, SMIC’s customers include lesser-known Chinese chip designers, including Gigadevice and Unisoc, as well as international companies such as Qualcomm and Broadcom.
However, its more advanced products are said to be two generations behind what competing manufacturers – including the Taiwan Semiconductor Manufacturing Company (TSMC) and South Korean Samsung – are capable, as the SMIC currently cannot manufacture. transistors as small as they can get. This means that its products are not suited to be the cutting edge processors of the latest smartphones or other advanced gadgets.
Part of the reason is due to existing restrictions Washington has placed on the company.
At present, the only way to make the most advanced logic chips is to use hardware made by a Dutch company, ASML.
SMIC ordered a $ 150 million lithography machine – which uses lasers focused by giant mirrors to print tiny patterns on silicon – from ASML in 2018. But Reuters reported the White House had convinced the Dutch government to block the export for security reasons.
An ASML spokesperson declined to comment when asked by the BBC if the deal was still in limbo.
Adding the minimum wage to the list of US entities would prevent the Chinese company from sourcing hardware, software and chemicals from other suppliers.
For now, the company hopes to avoid this result by clearly refusing to supply the People’s Liberation Army with products.
“Any assumption about the company’s ties to the Chinese military are false statements and false accusations,” he said.
But this has been questioned by others.
A Chinese state-run newspaper said the case illustrates the need for a “new long march” to “control all research and production chains in the semiconductor industry.”
Bloomberg reported that Beijing plans to unveil new policies to support the sector in October.