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U.S. restricts trade with China’s largest chipmaker due to alleged military ties

The U.S. government has placed trade restrictions on Semiconductor Manufacturing International Corp., China’s largest chipmaker, on allegations of connections to the Asian country’s military.

Earlier this month, the Trump administration was reportedly looking into adding SMIC to the Commerce Department’s entity list, where it would join fellow Chinese companies Huawei and ZTE, with the Defense Department working with other agencies over the matter. Sources claimed that the government was scrutinizing ties between SMIC and the Chinese military, with the chipmaker denying the alleged connections.

The Commerce Department has reportedly pushed through with tightening exports to SMIC. In a letter sent to U.S. computer chip companies, seen by the Wall Street Journal and Reuters, the department requires them to secure individual export licenses if they want to continue to do business with SMIC, as there is “unacceptable risk” that the equipment supplied to SMIC will be used for military purposes.

The restrictions represent a turnaround in U.S. policy from earlier this year, when the Commerce Department told applicants for “military end user” licenses to sell to SMIC that the licenses were not required, Reuters reported, citing three sources familiar with the matter.

The designation on SMIC, however, is not as severe as being blacklisted, which makes it difficult to secure export licenses, Reuters reported.

“SMIC reiterates that it manufactures semiconductors and provides services solely for civilian and commercial end-users and end-uses,” a spokesperson said in a statement to the Wall Street Journal. “The company has no relationship with the Chinese military and does not manufacture for any military end-users or end-uses.”

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