The move was reportedly under consideration earlier in the month (see US considers targeting SMIC with trade embargo ) but SMIC's share price fell by 7 percent on the news on morning of Monday September 28.
This marks an extension of a trade blacklist that has effectively cut Chinese communications equipment company Huawei off from its sources of ICs by including the company on its "entity list." (see US government reinforces Huawei chip embargo ). Although SMIC is not yet at the same technical level as Huawei's principal foundry TSMC, it is China's best hope of moving towards self-sufficiency in leading-edge semiconductors in the long term.
The US Department of Commerce told companies on Friday that exports to SMIC carried an "unacceptable risk" of being diverted to "military end use" the Financial Times reported. With SMIC added to the entity list companies will now require licenses to sell specific products to SMIC.
SMIC relies on chip manufacturing equipment from US companies Applied Materials Inc. and Lam Research as well as from companies headquartered in countries that wish to remain on good terms with the US. One such is ASML Holding NV (Bilthoven, The Netherlands). SMIC ordered an EUV lithography machine from ASML back in 2018 but it has not been delivered (see ASML delays Chinese delivery of EUV lithography tool ).
SMIC delisted from the New York Stock Exchange in 2019 and raised $7.6 billion on the Shanghai stock exchange in 2020 where investors are betting that state support will guarantee their investment will increase in value. The move can be seen as part of a move towards self-sufficiency by China and a decoupling from the West.
On September 28 SMIC acknowledged that it had seen copies of a document reportedly issued by the Bureau of Industry and Security of the United States Department of Commerce but said it had received no official information.
In response SMIC re-iterated an earlier