The US has blacklisted China's top chipmaker SMIC, raising the stakes in the ongoing trade spat between the two largest economies of the world even as President Donald Trump is set to exit office on January 20. At least a dozen other companies will also be blacklisted along with SMIC. The US says there is evidence for links between SMIC and Chinese military industrial companies.

The move, which burnishes Trump's sharp and tough China policy, comes weeks before he leaves the White House and Democratic President-elect Joe Biden takes office.

Cripple China's Dominance

SMIC
SMIC opened at 95 yuan on its Shanghai debut, selling 1,685,620,000 shares at 27.46 yuan per piece YouTube Grab

Once the sanctions come into force, American companies will not be able to do business with the Chinse giant without first getting a license, which will be a tough task given that relations between the two countries are strained.

China believes that the US is aiming to cripple China's rise as a global technological leader through these moves. Beijing also accuses Washington of trying to weaponize trade in order to win strategic goals. It also says the US is trying to resort to unfair means to retain its edge as a global technology powerhouse.

Huawei Logo
Huawei Logo Wikimedia Commons

Reuters also reported that the US is on course to blacklist add around 80 more companies and affiliates, most of them Chinese. The list already has some 275 Chines companies, including telecoms equipment giants like Huawei Technologies and ZTE Corp, as well as surveillance camera maker Hikvision.

The US Commerce Department had put several companies suspected of having links with the Chinese military under the scanner. These companies include those involved in the various militarization projects in the South China Sea, where the US has been fighting for freedom of navigation.

Why SMIC?

The Semiconductor Manufacturing International Corp (SMIC) is the largest Chinese chip manufacturer, and by blacklisting it, the US can deal a heavy blow to China. The move will obviously play out to the advantage of Taiwan Semiconductor Manufacturing Co, which is the world's largest chipmaker.

Donald Trump
Donald Trump addressing the nation at the White House on Wednesday. Twitter

In Early September, Pentagon had made the proposal to slap a ban on SMIC. While many US businesses will also be affected by the move, SMIC will be hit hard as US companies and suppliers would be barred from giving it American-based tech. The move came after US defense chiefs feared that SMIC has China military links., a charge SMIC denies.

"We have no relationship with the Chinese military. Any assumptions of the company's ties with the Chinese military are untrue statements and false accusations'" the chipmaker told Bloomberg. SMIC's Hong Kong-listed shares had dropped a whopping 23 percent on the Pentagon report.

SMIC is a major semiconductors provider to key Chinese companies like Huawei. Analysts said in September that a US clampdown could even threaten the existence of SMIC.