US smacks SMIC and keeps the heat on Huawei

The US indirectly dealt another blow to Huawei as the Department of Commerce added SMIC to the Entity List.

"The Entity List designation limits SMIC's ability to acquire certain U.S. technology by requiring U.S. exporters to apply for a license to sell to the company," the government said in its press release.

The world's largest drone maker, DJI, was also included in the list of 60 more companies from China added to the list this week.

In November, the White House took a shot at SMIC when it issued an executive order saying US persons would have until November 11, 2021, to divest themselves of shares in "any Communist Chinese military company."

The November executive order didn't prohibit companies from buying or selling supplies or technologies to SMIC. Now the heat has been turned up a few notches.

SMIC is the largest chipmaker in China and its chief competitor is Taiwan Semiconductor Manufacturing Co. (TSMC). SMIC and TSMC both rely on US capital equipment and manufacturing tools and design expertise to produce their chips. Both firms are also directly tied to Huawei.

In 2019, telecom gear maker Huawei accounted for 19% of sales at SMIC and 14% of sales at TSMC, according to Bloomberg.

While SMIC makes chips that Huawei uses in its low-end handsets, the company does not yet make the 7nm chips required for high-end smartphones.

"SMIC doesn't have 7nm capability," said Linley Gwennap, a principal analyst with The Linley Group, has told Light Reading. "They are several years behind TSMC in that regard."

Huawei has already been cut off from buying chips designed with US technology and supplies from TSMC.

In May, the US clamped down on Huawei by keeping it from buying chips or gear made with US tech or software. In August, the US added 38 more firms to its Entity List as a way of closing the loopholes it left in the May trade action and effectively cutting Huawei off from TSMC.

According to in-country media reports, SMIC had been working to quickly develop its high-end chip-making processes once the US put the brakes on Huawei's supply line from TSMC.

With SMIC now on the Entity List, the US government is making a clear signal that it won't even hear requests for special permission to supply chips to companies like Huawei under the new rules.

"Items uniquely required to produce semiconductors at advanced technology nodes – 10 nanometers or below – will be subject to a presumption of denial to prevent such key enabling technology from supporting China's military-civil fusion efforts," the Commerce Department said in a statement.

Phil Harvey, Editor-in-Chief, Light Reading

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