US Department of Commerce has added Chinese foundry SMIC in its list of sanctioned companies that will have their access to US technology blocked.
SMIC was among 77 companies, 60 of them Chinese, added to Entity List. The addition was due to China’s military-civil fusion (MCF) doctrine and evidence of activities between SMIC and entities of concern in the Chinese military industrial complex, the Department said.
SMIC is a major semiconductor chip firm and its chips are used by Chinese companies such as Huawei.
The company has secured 14nm node production process and has been developing the 7nm process.
Samsung Electronics and TSMC are the only two foundry companies in the world that can make chips in the smaller 5nm process.
People familiar with the matter said SMIC was behind Samsung and TSMC in technology but has grown fast in recent years thanks to support from the Chinese government.
US Secretary of Commerce Wilbur Ross appeared on Fox Business Network earlier this month and said the government will block SMIC access to semiconductor technology smaller than 10nm.
China’s foreign ministry has protested the move.
The ban against SMIC will likely benefit South Korean foundry companies Samsung Electronics and DB HiTek.
However, currently there is an oversupply of orders for foundry companies so it remains to be seen whether these companies can handle the additional order. SMIC has recently hired an ex-CTO of TSMC as vice chairman.
The continued trade dispute between the US and China also loom as a long-term risk for South Korean companies due to the uncertainty it causes.