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US finds new Huawei to hurt China with new sanctions at top chip maker SMIC

Alleges silicon has military applications so puts more products on 'get a license before exporting' lists

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The US government has told American companies that make semiconductor manufacturing kit that they must obtain a licence to export their products to China's largest chip maker, the Semiconductor Manufacturing International Corporation (SMIC).

The US Department of Commerce said American exports to SMIC pose an "unacceptable risk" of being used for "military end use", according to a copy of a letter seen by the Financial Times. The news was subsequently reported by several newswires that said they, too, had seen the document.

SMIC has worked for several US-based fabless silicon designers, including Qualcomm, Broadcom, and Texas Instruments, among others. Huawei is thought to be another client, and SMIC has also applied to continue supplying the controversial company.

Although the Department of Commerce directive is aimed at American businesses, it may extend to include foreign companies that use US technology, such as Japan's Tokyo Electron, which supplies chip-making kit such as etching machines and film deposition equipment to SMIC. Nikon and Canon have also promoted semiconductor exposure devices to Chinese clients.

The rules have the potential to derail China's push to become self-sufficient in semiconductors and reduce its dependence on US technology. Under the "Made in China 2025" strategy, the country aims to make 70 per cent of its semiconductors locally, up from less than 20 per cent now. SMIC, one of the country's "national champions", is considered the flagbearer of the plan.

The impact of the new rules depends on which SMIC suppliers Washington decides to target. In the worst-case scenario, the US could use the rules to cut off SMIC from US chip-making kit and software entirely. The Reg suspects that the US will not deprive American businesses of all trade, but will make it hard for SMIC to make advanced products that could help China's government or military.

SMIC's current mainstay chips are made on 55nm to 65nm processes, but it can also produce more advanced 14nm silicon. Analysts believe the company is two generations behind rival Taiwan Semiconductor Manufacturing Company, which produces chips using 5nm tech for the smartphone market.

In response to the directive, SMIC said it "has no relationship with the Chinese military, and does not manufacture for any military end user or end uses". The company said it had not received any formal notification of the sanctions. ®

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