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Chip group to warn Trump administration against blacklisting China's SMIC: document

FILE PHOTO: A security officer stands outside a building of SMIC during its grand opening in Shanghai November 22, 2001.

By Alexandra Alper and Karen Freifeld

WASHINGTON (Reuters) – Companies that supply the chip sector with sophisticated and expensive equipment plan to warn the Trump administration against a proposal to blacklist China’s top chipmaker, Semiconductor Manufacturing International Corp <0981.HK>, arguing it would be “detrimental” to U.S. industry.

The companies are represented by the semiconductor and electronics manufacturing suppliers industry group SEMI, which drafted a letter seen by Reuters that could be sent as soon as this week to Commerce Department Secretary Wilbur Ross.

In the draft letter, the group argued that blacklisting SMIC would jeopardize the United States’ technological edge by making it harder for U.S. companies to supply the company, which accounts for as much as $5 billion in annual U.S. origin equipment and material sales.

They also argue that such a move would “contribute to a growing perception” that the delivery of U.S. goods is “unreliable” and hit U.S. market share worldwide.

“We urge the Department to carefully consider the immediate and long-term detrimental impacts to U.S. industry, economic and national security that may result from the addition of SMIC to the Entity List,” said the group, which has 2,400 members worldwide, including SMIC and U.S. chip equipment makers Lam Research Corp <LRCX.O> and Applied Materials Inc <AMAT.O>.

The Commerce Department did not immediately respond to a request for comment.

Joe Pasetti, SEMI’s vice president of global public policy, said: “We don’t comment on draft letters leaked to the press.”

Reuters reported earlier this month that the Defense Department was working with other agencies to determine whether to add SMIC to the Commerce Department’s “entity list,” which would force U.S. suppliers to seek hard-to-get licenses before shipping to the company.

Shares of the company plunged by nearly a quarter on the news.

SMIC said in a statement at the time that it was “in complete shock” over the news but was open to communication with U.S. government agencies in hopes of resolving any misunderstandings. While a Defense Department official did not disclose the motive for the proposed action, SMIC’s relationship to the Chinese military is under scrutiny, sources told Reuters, as the Trump administration increasingly trains its focus on China’s military muscle.

The entity list has been used as a tool by the administration against Chinese companies under scrutiny in Washington over national security concerns, from telecoms giant Huawei Technologies Co Ltd to surveillance equipment producer Hikvision <002415.SZ>.

(Reporting by Alexandra Alper and Karen Freifeld; Editing by Marguerita Choy and Peter Cooney)

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