Trump Admin Blacklists Major Chinese Chip Maker in Latest Round of Tech Fight

The Trump administration will add a major Chinese chip manufacturer to an export blacklist over the company’s alleged ties to the People’s Liberation Army, the U.S. Commerce Department announced on Friday.

Semiconductor chips are a crucial component of advanced computing technologies used for smartphones, artificial intelligence, and military tech, among other applications. SMIC is China’s leading chip manufacturer and has received billions of dollars in state funds, however the chips are dependent on American technology for production.

The world’s top chip makers are the Taiwan Semiconductor Manufacturing Company, which controls about 55 percent of the world market for chips, and South Korea’s Samsung. These two companies are competitors in the production of ten nanometer semiconductor chips, the most advanced class of chip currently available, and TSMC is currently the dominant manufacturer of such technology.

The order by the Commerce Department will ban U.S. exports to China’s competitor Semiconductor Manufacturing International Corp (SMIC), effectively prohibiting exports of technology that would allow SMIC to build its chips.

“Entity List restrictions are a necessary measure to ensure that China, through its national champion SMIC, is not able to leverage U.S. technologies to enable indigenous advanced technology levels to support its destabilizing military activities,” Commerce Secretary Wilbur Ross told the Wall Street Journal.

The decision will likely increase tensions between China and the U.S. over the critical technology, especially because of Taiwan’s dominance in the field. China does not recognize Taiwan as an independent country, while Taiwan, which sits 110 miles from the Chinese mainland, maintains its independence as a democratic nation.

The Trump administration celebrated TSMC’s announcement in May that the company would build a chip manufacturing plant in Arizona. However, TSMC is also a major supplier to Chinese telecommunications firm Huawei, which is deemed a national security threat by the U.S. The Arizona plant could help TSMC leverage the U.S. government to weaken sanctions against Huawei.

The Commerce Department’s decision to place SMIC on a blacklist comes amid infighting between the State and Treasury Departments over a Trump administration ban on investment in Chinese companies with ties to the PLA. State Department and some Defense Department officials are trying to expand the list of companies banned from American investment, while Treasury officials are pushing back, the Journal reported on Friday.

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