SMIC

SMIC Joins the Big Bath of China Security Threats

The rules don’t appear as strict as those placed on Huawei Technologies Co. earlier this year, according to Bloomberg News. That move ended up forcing suppliers like Taiwan Semiconductor Manufacturing Co. to stop making chips to the Chinese company’s design.

Yet the timing should raise eyebrows. The U.S. Commerce Department is implementing the ban because products sold to the chipmaker pose an “unacceptable risk of diversion to a military end use,” according to a letter from the department’s Bureau of Industry and Security, the report said.

That sounds terrifying. In reality, anything sold to any company could end up having a military use: from an operating system developed by a software maker (armies use computers), to rubber and chemicals made by industrial giants (military trucks have tires).

Despite the increased rhetoric from the Trump administration, the U.S. doesn’t apply arbitrary rules to its definition of military end use. In fact, the bureau has a set of guidelines on the topic. In April, it broadened its definition while adding China to a small cohort of nations — Russia and Venezuela being the others — for which a specific set of Export Administration Regulations apply. It outlined the likely result:

This expansion will require increased diligence with respect to the evaluation of end users in China, particularly in view of China’s widespread civil-military integration.

A month later, the department added 24 groups to its entities list because of a risk that they would support “procurement of items for military end-use in China.” SMIC wasn’t among them. 

It’s possible that something happened over the past four months to make the Commerce Department suddenly worried about the threat from SMIC. Maybe that extra $7 billion it raised in a Shanghai listing two months ago raised red flags, or it could be that the chip

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