The United States has imposed sanctions on China's largest microchip manufacturer, Semiconductor Manufacturing International Corp. (SMIC). The sanctions, in particular, prohibit the export of materials to the company, due to the вЂњunacceptable riskвЂќ that the materials will be used вЂњfor military purposes,вЂќ according to a letter from the US Department of Commerce to the SMIC. The FT was the first to report the letter.
Sanctions could destroy China's desire to become a self-sufficient producer of high-tech goods, writes CNBC. Semiconductors are an important part of the production of high-tech goods, such as smartphones, and China continues to depend on its imports.
Shares of the company fell 25% on Friday amid news of restrictions. The company claims that it does not cooperate with the Chinese armed forces and does not produce military goods.
Last year, similar sanctions were imposed on Huawei. At the time, the company, which is the world's second-largest maker of smartphones and uses chips and semiconductors made in the world using American technology, said the sanctions had put it on the brink of survival.
The United States has long claimed security risks from Chinese companies, in part because it believes Washington could provide opportunities for Chinese authorities to monitor users and spy. Under Chinese law, the government may have access to the data collected by the company or instruct the company to collect such data.