China’s biggest chip manufacturer’s future is uncertain amongst implications that the US government does have the possibility of stopping Semiconductor Manufacturing International Corp (SMIC) from continuing to do business with American companies.
The US Department of Defense has the intention of blacklisting SMIC based on supposed connections with the Chinese military. SMIC is very surprised by these claims and Beijing has accused Washington of using national security in order to conceal a trade dispute.
These moves taken against Huawei would mean that SMIC would not be able to receive software updates, technical upgrades or support provided that the US provider in question got a licence from Washington.
This might be an issue for the company as a whole and also challenge China’s bid for technological self-sufficiency. More than Huawei itself, SMIC is dependent on US innovations.
SMIC shares have fallen by about a quarter in Hong Kong and dropped by 11% in Shanghai, which means billions have been taken out of the company’s value.
Radio Free Mobile’s Richard Windsor said, “I think that it is quite possible that SMIC is added to the entity list meaning that all of its suppliers will be forced to obtain licences in order to sell equipment and services.” This could end up being a huge issue as the US Commerce Department said that its default is to not accept applications, which would be very difficult for SMIC.
“I think that like Huawei, the US is not actively seeking to put it out of business but that its real intent is to put pressure on the Chinese government when it comes to negotiating the overall terms of their long-term relationship,” he said.