Not Done Yet – BIS Adds SMIC to Entity List

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In one of the most significant export control actions of the Trump Administration, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) added Chinese semiconductor company Semiconductor Manufacturing International Corporation (“SMIC”) to the Entity List today.  The move to “protect U.S. national security” comes as tensions between the U.S. Government and China continue to escalate in the final weeks of the Trump Administration.

The Entity List designation bans the export, re-export, and in-country transfer of all items subject to the Export Administration Regulations (“EAR”) to SMIC without prior government authorization or license.  “Items uniquely required to produce semiconductors at advanced technology nodes—10 nanometers or below—will be subject to a presumption of denial to prevent such key enabling technology from supporting China’s military-civil fusion efforts,” according to the BIS press release.  Today’s action also added drone maker SZ DJI Technology Co. Ltd. and more than 60 other companies to the Entity List for actions deemed contrary to U.S. national security or foreign policy interests.

Headquartered in Shanghai, China, SMIC is one of the leading semiconductor foundries in the world and the largest and most advanced foundry in China.   With over 15,000 employees, SMIC recorded total revenue of approximately $3.116 billion in 2019.  SMIC serves a broad global customer base including leading integrated device manufacturers, fabless semiconductor companies and system companies, with North American customers contributing more than 25% of the company’s 2019 revenue.

Today’s action could have far reaching ripple effects beyond SMIC.  Several prominent U.S. companies undertake business with SMIC and may regularly transfer technology subject to the EAR to the Chinese semiconductor company.  These companies may now be subject to the newly imposed licensing requirement in their dealings with SMIC.

We will continue to monitor the situation and report as developments arise.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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