SMIC Hong Kong International Company Limited (SMIC HK) has been removed from the US Department of Defense (DOD) 1260H list of Chinese military companies.
A US DoD press release announced on January 31 that it had updated the list of Chinese military companies operating directly or indirectly in the US In a surprising development, although SMIC and its subsidiaries, including SMIC Beijing, SMIC Shanghai, SMIC Tianjin, SMIC Shenzhen, SMIC Holdings, SMIC Southern Integration, and SMIC Northern Integration, remain on the 1260H list, the press release indicated that SMIC Hong Kong Limited (0981.HK) has been removed.
The reason for given for the removal of SMIC Hong Kong is brief. The US DoD's updated list only noted that the company is "No longer owned by SMIC."
Section 1260H is a provision of the William M. (Mac) Thornberry National Defense Authorization Act (NDAA) for the fiscal year 2021, requiring the US DoD to publish an annual list of "Chinese military companies" (CMCs).
The South China Morning Post reported that a company's inclusion on the list doesn't impose an outright prohibition. However, it does make the companies ineligible for Defense Department contracts. Moreover, this designation may trigger being listed by the US Treasury Department, limiting the companies' potential business opportunities.
Taiwanese media outlet Unique Business News quoted Chai Huan-hsin, special advisor to the Taiwan Photovoltaic Industry Association (TPVIA), saying, "Among the three removed Chinese companies, the most significant is SMIC International HK." SMIC is not only China's largest semiconductor foundry, but it also manufactured Huawei's Kirin 9000 7-nanometer process chip, which was previously one of the key enterprises controlled by the US," he added.
Chai said that although the US is shaping a crackdown on China through the updated list, the removal of SMIC International Hong Kong represents a show of goodwill towards China.
Reuters previously reported that being included in the US DoD 1260H list does not immediately result in sanctions but serves as a warning to US businesses and related entities about the risks of engaging in business with these Chinese companies.
While SMIC HK was removed from the 1260H, several other Chinese companies were added. Memory-chip maker Yangtze Memory Technologies Corp (YMTC) was added as a Chinese military-linked company with potential national security implications for the United States.
Other entities labeled include artificial intelligence companies Yitu Technology and Megvii, drone manufacturer Chengdu JOUAV, lidar producer Hesai Technology, and tech company NetPosa. All the newly listed companies operate in the US.