SMIC is subject to export controls by the Trump administration and is not included in the Entity List, but US equipment suppliers must apply for a license before supplying

Yuyang from Aofei Temple
Quantum Bit Report | Public Account QbitAI

SMIC has still been targeted by the Trump administration.

According to Reuters, the US Department of Commerce required in a letter to SMIC's suppliers that they must apply for an export license before exporting sensitive technologies and equipment to SMIC.

The reason is that the technology and equipment exported to SMIC and its subsidiaries are at risk of being used for military purposes.

Earlier this month, Reuters quoted a US Department of Defense official as saying that the Trump administration was considering adding SMIC to the trade blacklist.

However, at present, the US Department of Commerce's official website has not released any information about SMIC being included in the "Entity List". According to interpretations by many media, this trade restriction measure is not as strict as that against Huawei and ZTE, and the difficulty of obtaining an export license has not reached the level of the "Entity List".

In response, SMIC said it had not received any official notification about new export restrictions and that it only produces commercial and civilian chips.

What aspects does the regulation involve?

The Wall Street Journal also said it had seen a copy of the letter.

The U.S. Department of Commerce said in the letter that exporting to SMIC or its subsidiaries could pose an unacceptable risk (referring to eventual military use) . Therefore, suppliers "must submit a separate valid license application before exporting, re-exporting or transferring domestically" certain sensitive technologies.

That is to say, American chip equipment suppliers including Lam Research , KLA Corp and Applied Materials , the world's largest semiconductor equipment manufacturer , will need to apply for a license in advance to eliminate risks if they want to export related products to SMIC in the future.

The Wall Street Journal also commented that this was a blow to China's efforts in chip technology.

Bloomberg analyzed that the severity of this export restriction is not as severe as the sanctions imposed by the US Department of Commerce on Huawei and some other Chinese companies on the "Entity List".

The report also quoted Kevin Wolf, an export control lawyer at Akin Gump and a senior official at the Obama administration’s Department of Commerce:

Military end-use rules apply only to a subset of goods listed under the U.S. rules of origin. The Entity List, on the other hand, applies to all goods originating in the U.S. and some goods originating in foreign countries.

About SMIC

Headquartered in Shanghai, SMIC is the largest and most technologically advanced integrated circuit chip manufacturer.

As of June 1, 2020, SMIC is able to provide global customers with integrated circuit wafer foundry and supporting services for multiple technology nodes ranging from 0.35 microns to 14 nanometers and different process platforms.

According to data from TrendForce, in the latest revenue ranking of the foundry industry, only SMIC and Hua Hong Semiconductor are Chinese mainland companies among the top ten in the world.

Just this month, the Semiconductor Industry Association (SEMI) , which has nearly 2,400 members , warned the Trump administration on behalf of manufacturers that American companies' annual sales of semiconductor equipment and materials amount to $5 billion, and blacklisting SMIC will make it difficult for American companies to supply it with products, thereby damaging the United States' own technological advantages.

SEMI also said that the move would deepen the global industry's impression that the United States is "unreliable in delivering products," resulting in a loss of market share for U.S. companies.

SMIC officially landed on the Science and Technology Innovation Board on July 16 this year, and its stock price soared 245.96% on the first day, with the highest price at 95 yuan. As of the close of trading on September 25, it fell 43% from the highest point to 53.7 yuan.

Reference links:
https://www.reuters.com/article/us-usa-china-smic-idUSKBN26H0LN
https://www.bloomberg.com/news/articles/2020-09-26/us-government-sanctions-chinese-chipmaker-smic-ft-reports?srnd=markets-vp
https://www.wsj.com/articles/us-sets-export-controls-on-chinas-top-chip-maker-11601118353