China’s SMIC Denounces Blacklisting by U.S., Warns of Serious Damage to Chip Production

China’s largest manufacturer of high-end computer chips, Semiconductor Manufacturing International Corp. (SMIC), issued a statement Sunday denouncing the U.S. government for blacklisting its products.

SMIC insisted its products are safe and denied allegations that it works for the Chinese military.

China’s state-run CGTN news service summarized the Chinese-language statement from SMIC:

The U.S. decision does not pose a significant negative impact to the company’s operation and finance in the short term, said SMIC.

According to an initial assessment by SMIC, the U.S. move will badly affect the company’s own R&D and production capacity construction of advanced technologies of 10nm and below.

The company added it will continue to cooperate with relevant U.S. government organs, taking all feasible measures to minimize adverse effects and work out a solution.

The U.S. Commerce Department added SMIC and over 60 other Chinese entities to its export blacklist Friday, citing “China’s military-civil fusion (MCF) doctrine and evidence of activities between SMIC and entities of concern in the Chinese military industrial complex.”

Commerce Secretary Wilbur Ross said the restrictions were necessary to “ensure that China, through its national champion SMIC, is not able to leverage U.S. technologies to enable indigenous advanced technology levels to support its destabilizing military activities.”

“We will not allow advanced U.S. technology to help build the military of an increasingly belligerent adversary,” Ross said.

Despite SMIC’s assurances of financial health, its shares in the Hong Kong stock index dropped by some 4.8 percent Monday. In a statement to the Shanghai stock exchange, SMIC said it would remain in communication with the U.S. government and seek to minimize the impact of the blacklist on company operations.

The South China Morning Post (SCMP) on Monday saw SMIC’s future as “uncertain,” suggesting the blacklist would have a more negative impact on the company’s cutting-edge research than its confident statement indicated. 

The SCMP reported a boardroom shakeup at SMIC after the blacklisting was announced, including continuing uncertainty over whether co-CEO Liang Mong Song has resigned from the company or not. SMIC is evidently seeking to reassure customers and investors that it has stable management while the Liang drama plays out. 

“Liang was still listed as co-CEO among other senior executives in SMIC’s stock filing issued Tuesday,” the report noted.