Local and international media have been focused on covering the US government’s moves against popular social media TikTok but what’s happening outside of the spotlight could have even bigger economic repercussions globally. Although not exactly the blacklisting that was earlier feared, the US Commerce Department has just placed restrictions on the export of American products to SMIC, China’s largest semiconductor company, which affects not only the already embattled Huawei but potentially even US companies like Qualcomm as well.
It was already expected that the US would tighten the noose on SMIC as part of its campaign against Huawei and other companies it has deemed to be a threat to its national security. The Department of Commerce stated last week that selling US-made products to the chipmaker posed an unacceptable risk to having those used by the Chinese government and military. SMIC insists that it has no ties to the Chinese government.
By blocking access to parts and materials for producing semiconductors, SMIC is in danger of losing its ability to supply chips to Huawei, the latter of which is already in dire straits when it comes to chip supplies. However, it will also lose its ability to sell chips to Qualcomm, its second-biggest customer.
SMIC, however, isn’t the only one directly affected by these new orders. US companies that supply such products to the Chinese chipmaker will now have to apply for an export license that the US government seems to rarely grant. This, in turn, could threaten to disrupt the global semiconductor market, even with the likes of Taiwan’s TSMC available to take SMIC’s former customers.
Of course, it could have been worse and SMIC could have been placed in the US’ Entity List, which would make it even more difficult to get any export license. Depending on how the export ban will be implemented, though, bringing SMIC down to its knees could increase the economic and political tension between the two world superpowers.