US ban on chipmaker giant SMIC could put Huawei in dire straits

The US government has hundreds of companies on its so-called Entity List and a good number of them come from China. One of the highest-profile names on that list in recent years has been, of course, Huawei. But if you thought the US was done with China’s biggest phone and network manufacturer, it seems to be moving to squeeze out any remaining life from Huawei. Its rumored next move, however, could provoke China to finally retaliate and throw the global economy further into chaos.

Reuters reports that the US Defense Department has recommended placing SMIC, China’s biggest semiconductor company and chip maker, on the entity list. As always, the allegations revolve around the company’s ties to the Chinese government, something that SMIC unsurprisingly denies. If approved, this would mean that US companies will need to apply for a license to sell or export not just materials but even software for SMIC’s use.

This could, in effect, cripple SMIC as any company supplying anything and everything that was made using American materials and technologies is covered by the ban. While SMIC might be able to get those from other companies outside the US, it might not be able to do so quickly, especially if it has to double-check that said sources don’t also use US products.

It shouldn’t be a surprise by now that Huawei will be affected by this unexpected proposal. Huawei already lost TSMC because of a new export ban from the Commerce Department and SMIC would have been the company’s Plan B. Now it seems that it will have to find another way out of this seemingly never-ending predicament.

China is unlikely to take this sitting down and could be the last straw before it acts in kind. But rather than simply affecting the countries and companies involved, the back and forth between the two economic giants will undoubtedly also disrupt supply chains, production, and even sales of products around the world as well.

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