Uncle Sam designates more Chinese tech slingers as military collaborators

No restrictions, but it could be harder to deal with American businesses

The chip wars between Washington and Beijing keep grinding on with more than a dozen Chinese tech companies now being added to a list of entities claimed by the Department of Defense (DoD) to be working for the military.

The update adds more than a dozen technology companies, including memory chip manufacturer Yangtze Memory Technologies Corp (YMTC), artificial intelligence outfits Yitu Technology and Beijing Megvii, Lidar developer Hesai Technology, drone maker Chengdu JOUAV, and NetPosa, a video monitoring company.

Unlike the Entity List maintained by the US Department of Commerce, appearing on the DoD list [PDF] does not involve immediate restrictions for the companies involved. Inclusion, however, is likely to harm their reputation with any business partners and may warn US organizations away from having any dealings with them.

YMTC was already added to the Entity List more than a year ago, which means that US companies are not allowed to supply goods to the chipmaker without being issued a difficult-to-obtain license. The Chinese biz was trying to raise fresh capital last year after reportedly using up its cash reserves in efforts to adapt to the sanctions imposed by Washington.

The DoD list, or "Section 1260H" list as it is otherwise known, was first created as part of the US National Defense Authorization Act for fiscal 2021, and is updated annually. The latest update to the Act also prohibits the DoD from contracting with any of the designated companies in future, Reuters said.

According to the DoD, China's armed forces are following a covert modernization strategy that relies on a "military-civil fusion" approach to buy advanced tech and expertise developed by companies, universities, and research programs that appear to be civilian operations.

The department said it will continue to update the list with additional entities as appropriate, and that the US government reserves the right to take additional actions against any listed entities.

In related news, some of China's biggest chip companies are reported to have warned of considerable financial losses for 2023, despite Beijing's efforts to ramp up the domestic semiconductor industry in response to US trade restrictions.

According to the South China Morning Post, fabless chip designer Loongson Technology is expecting its revenue for 2023 to be down 31 per cent year-on-year, leading to a loss of ¥310 million ($43.36 million), and AI accelerator Cambricon Technologies is also forecasting revenue to be down and a full-year loss of up to ¥924 million ($130 million).

Some of the blame is being laid at the door of Washington's sanctions. Both companies are on the Department of Commerce Entity List, which restricts their ability to source advanced tech from the US and their ability to sell to certain customers.

The Biden administration would no doubt point out that disrupting the local chip industry in the Middle Kingdom was the whole point of the restrictions in the first place. ®

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