SMIC headquartersSource: SMIC

What you need to know

  • The Trump administration has added SMIC to a blacklist of entities with alleged ties to the Chinese military.
  • The move is the latest in a series of restrictions placed on the manufacturer over the course of the year.
  • At this point, it's unclear if the Biden administration will overturn these changes once the president-elect takes office next month.

The Trump administration has added Semiconductor Manufacturing International Corporation (SMIC), China's largest chipmaker, to a blacklist of entities that have alleged ties to the Chinese military. The move is the latest in a series of restrictions that were put on the chip manufacturer over the course of the year.

A few months ago, the U.S. government mandated that U.S. companies will need a license to do business with SMIC after stating that the company posed an "unacceptable risk of diversion to a military end use in the People's Republic of China."

SMIC relies on U.S. equipment in its manufacturing facilities, and the move restricts its ability to get the requisite hardware it needs to set up a new fabrication plant. SMIC lags behind the likes of Samsung LSI and TSMC when it comes to foundry innovation, but the Chinese government has invested over $3 billion this year to establish new production facilities.

China is increasingly looking to reduce its reliance on the U.S. in the semiconductor segment, but it still needs equipment and patents that are owned by U.S. businesses. With the Trump administration out the door in just over a month, we'll have to wait and see how Biden approaches this particular situation.