US eyes sanctions for China’s largest chip maker
SHARES in China’s biggest chip maker plunged by 23pc yesterday after reports that the US may impose sanctions on the company.
The Trump administration is considering adding Semiconductor Manufacturing International Corp (SMIC), which produces chips for Huawei, to the Department of Commerce’s entity list. The report, originally from Reuters,
led to more than $28bn (£21bn) being wiped off the firm’s valuation.
SMIC’s ties to the Chinese military are under scrutiny, according to the report. The company subsequently said it was “in complete shock and perplexity to the news”, adding that it had no relationship with the Chinese military. The US defence department said that it was looking at the company’s actions to see if they would “warrant adding them” to the entity list, in a comment to CNBC. The entity list, which also includes Huawei, is made up of companies, institutions and governments that need to acquire licences to trade with the US.
SMIC relies on a number of American companies for its key production equipment – and inclusion on the list could decimate the business’s supply lines. As much as 50pc of SMIC’s equipment is from the United States, Jefferies has estimated.