Reuters first reported the addition of SMIC and other
companies earlier on Friday. The move is seen as the latest in Republican
Trump's efforts to burnish his tough-on-China image as part of lengthy fight
between Washington and Beijing over trade and numerous economic issues.
The US Commerce Department said the action against SMIC
stems from Beijing's efforts to harness civilian technologies for military
purposes and evidence of activities between SMIC and Chinese military
industrial companies of concern. The Commerce Department will "not allow
advanced U.S. technology to help build the military of an increasingly
belligerent adversary," Secretary Wilbur Ross said in a statement.
The department also said it was adding the world's biggest
drone company DJI to the list along with AGCU Scientech; China National
Scientific Instruments and Materials, and Kuang-Chi Group for allegedly
enabling "wide-scale human rights abuses." "The United States
will use all countermeasures available, including actions to prevent (Chinese)
companies and institutions from exploiting US goods and technologies for malign
purposes," Secretary of State Mike Pompeo added in a separate release.
SMIC and the other companies did not immediately comment.
But some lawmakers, industry executives and former officials raised questions
about the impact of Friday's move against SMIC. Generally, entity-listed
companies are required to apply for licenses from the Commerce Department that
face tough scrutiny when they seek permission to receive items from U.S.
suppliers.
But SMIC will only face a tough review standard when it
seeks licenses for highly advanced U.S. chipmaking equipment at 10 nanometers
or below. Licenses for all other items shipped to the company will be reviewed
on a case-by-case basis, the Commerce Department said.
Republican Congressman Michael McCaul, ranking member of the
House Foreign Affairs committee echoed Reinsch's comments, saying he feared the
rules were more "bark than bite." "I have concerns it undermines
the intent, and may create an exception for malign actors to evade U.S. export
controls" he said in a statement.
'ARBITRARY SUPPRESSION'
But Chinese authorities did not mince words about
Washington's latest gambit. In an address to the Asia Society on Friday,
China's State Councillor Wang Yi, who is also the country's foreign minister,
noted the expanding list of US sanctions and called on Washington to stop its
"arbitrary suppression" of Chinese companies.
China's foreign ministry said that if true, the blacklisting
would be evidence of US oppression of Chinese companies and that Beijing would
continue to take "necessary measures" to protect their rights.
"We urge the US to cease its mistaken behavior of unwarranted oppression
of foreign companies," ministry spokesman Wang Wenbin told a regular news
conference in Beijing on Friday.
The Commerce Department released a list of 77 companies and
affiliates to the so-called entity list, including 60 Chinese companies. The
designations by the Commerce Department include some entities in China that
allegedly enable human rights abuses and some helping it construct and
militarize artificial islands in the South China Sea, the agency said.
It also cited entities that acquired US-origin items to
support the Chinese military and those engaged in the theft of US trade
secrets. Companies previously added to the list include telecoms equipment
giants Huawei Technologies Co and 150 affiliates, and ZTE Corp over sanction
violations, as well as surveillance camera maker Hikvision over suppression of
China's Uighur minority.
FRAYING TIES
Shares in SMIC, formally the Semiconductor Manufacturing
International Corp, fell 5.2% in Hong Kong on Friday, while the company's
Shanghai-listed shares declined 1.8%. The benchmark indices in the two markets
were down less than 1%.
SMIC had already been in Washington's crosshairs. In
September, the Commerce Department mandated that suppliers of certain equipment
to the company apply for export licenses after concluding there was an
"unacceptable risk" that equipment supplied to it could be used for
military purposes.
Last month, the Defense Department added the company to a
separate blacklist of alleged Chinese military companies, effectively banning
U.S. investors from buying its shares starting late next year. SMIC has
repeatedly said that it has no relationship with the Chinese military.
SMIC is the largest Chinese chip manufacturer but trails
Taiwan Semiconductor Manufacturing Co, the industry's market leader. It has
sought to build out foundries for the manufacture of computer chips that can
compete with those of TSMC.
Ties between Washington and Beijing have grown increasingly
antagonistic over the past year as the world's top two economies sparred over
Beijing's handling of the coronavirus outbreak, imposition of a national
security law in Hong Kong and rising tensions in the South China Sea.