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Trump administration looking at banning business with China’s largest chipmaker

The Trump administration is reportedly looking into adding China’s largest chipmaker to the Commerce Department’s entity list, which will severely restrict the company’s business with U.S. firms.

A spokeswoman told Reuters that the Defense Department was working with other agencies to determine whether Semiconductor Manufacturing International Corporation should be blacklisted, similar to the treatment against other Chinese companies such as Huawei and ZTE.

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The proposal was confirmed by a Pentagon official, but the reasons for the action were not revealed. However, sources told Reuters that the Trump administration was scrutinizing ties between SMIC and the Chinese military.

In its response to matter, SMIC said that it was “in complete shock” that the Trump administration is considering adding the company to a trade blacklist. SMIC said that its alleged ties with China’s military are “untrue statements and false accusations,” but it remains open to working with the U.S. government to resolve “potential misunderstandings.”

If SMIC is blacklisted, U.S. suppliers will need to secure a difficult-to-obtain license before they are allowed to continue shipping components to the chipmaker.

U.S. vs. Huawei

It remains to be seen if SMIC will suffer the same fate as Huawei, one of the Chinese companies that have been hit hardest by the Trump administration’s restriction. New rules issued by the U.S. government in May further clamped down on Huawei’s business.

A report from the Federal Communications Commission, however, revealed that it will cost rural telecommunications providers at least $1.8 billion to replace the equipment from Huawei and fellow Chinese manufacturer ZTE that are currently in use in their networks.

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