BIS Informs Companies of Increased Export Restrictions on SMIC

The Commerce Department informed some U.S. chip companies they need export licenses before shipping certain items to Semiconductor Manufacturing International Corporation, China’s largest semiconductor maker, according to two people familiar with the situation. Commerce sent the information in a letter to companies last week, the people said, which effectively placed export controls on shipments to the Chinese company.

In the letter, Commerce said exports to SMIC “may pose an unacceptable risk of diversion to a military end use” in China, according to a Sept. 28 report in The Wall Street Journal, which was first to report the letter. Commerce also said exporters “must submit an application for an individually-validated license prior to exporting, reexporting or transferring in-country” in China, the report said. The Commerce Department’s Bureau of Industry and Security recently increased license restrictions on exports to military end-users or for military end-uses in China (see 2007090075).

A spokesperson for BIS declined to comment on the letter. BIS “is constantly monitoring and assessing any potential threats to U.S. national security and foreign policy interests,” the spokesperson said. “While we cannot comment on any specific matter, BIS, with its interagency partners, will take appropriate action as warranted.”

SMIC earlier this month said it was in “complete shock and perplexity to the news” that BIS was considering the restrictions (see 2009080038). In a Sept. 28 statement, the company said it has not been told by the U.S. that it is subject to export controls. SMIC said it manufacturers semiconductors “solely for civilian and commercial end-users and end-uses” and has “no relationship” with the Chinese military. “The Company will continue to pay close attention to this matter,” it said.

China said the U.S. is “abusing export restrictions” and international trade rules to suppress foreign companies. “China will continue taking necessary measures to uphold the legitimate rights and interests of Chinese companies,” a foreign ministry spokesperson said Sept. 28.