Chip Manufacturers From China Are Prohibited From Using US Technology

Ilustrasi chipset (Photo by Chris Ried on Unsplash)

JAKARTA - The Chinese chip maker, Semiconductor Manufacturing International Corporation (SMIC), is having a tough week. This is because the United States (US) Government includes it in a prohibited company.

Citing CNN, Saturday, December 19, the US Department of Commerce announced that various Chinese companies, including SMIC, were included in the list of prohibited entities. In fact, they are also forced to stop using US technology.

"We will not allow advanced US technology to help build the military against an increasingly aggressive adversary," US Commerce Secretary Wilbur Ross said in a statement. He also added that the company "perfectly describes" China using US technology to modernize its military.

Obviously this step can cause serious problems for SMIC, which makes a lot of chips. In fact, globally it relies heavily on software, machinery and equipment from the US to design and manufacture semiconductors.

Chinese smartphone maker and 5G network supplier Huawei, for example, has seen its sales growth slow significantly since it was added to the US entity list. Since SMIC is on the US entity list, it requires US exporters to apply for a license to make sales to SMIC.

"Items that are uniquely needed to produce semiconductors on advanced technology will be subject to prejudice to prevent technology from supporting China's military-civilian fusion efforts," the US Commerce Department said.

SMIC had faced problems before. Chinese state media reported that SMIC co-CEO Liang Mong Song is stepping down. In the unusual incident, the company said in a statement that it was trying to confirm the report, despite knowing about "Liang's desire to resign under certain conditions."

"We urge the US to stop its misconduct that unfairly pressures foreign companies," Chinese Foreign Ministry spokesman Wang Wenbin told reporters.

"China will continue to take the necessary measures to protect the legitimate rights and interests of Chinese companies," he added.

SMIC shares slumped about 5 percent in Hong Kong on Friday 17 December. SMIC shares have lost nearly 10 percent this week, the worst since September, when media reports suggested that the US government was contemplating imposing restrictions on SMIC's business.

SMIC plays a vital role in strengthening China's technology ambitions. Most of China's chipset supply comes from foreign companies, which power everything from Chinese smartphones and computers to telecommunications equipment.

Last year, China imported chips worth $ 306 billion or 15 percent of the total value of Chinese imports, according to government statistics. The main shareholder of SMIC is a Chinese company that said in early 2020 it wanted to invest in technology and catch up.

Pressure from the US will make it even more difficult for SMIC to catch up with foreign rivals. The US Department of Defense earlier this month added the company to a list of companies it claims to be owned or controlled by the Chinese military. That decision prohibited Americans from investing in SMIC. SMIC said that they have no relationship with the Chinese military.