Chip group to warn the Trump administration against blacklisting China's SMIC

Companies that supply the chip sector with sophisticated and expensive equipment plan to warn the Trump administration against a proposal to blacklist China's top chipmaker Semiconductor Manufacturing International Corporation, arguing it would be "detrimental" to US industry.

The companies are represented by the semiconductor and electronics manufacturing suppliers industry group SEMI, which drafted a letter obtained by Reuters that could be sent as soon as this week to Commerce Department Secretary Wilbur Ross.

In the draft letter, the group argues that blacklisting SMIC would jeopardize the United States' technological edge by making it harder for US companies to supply the company, which accounts for as much as $5 billion in annual US origin equipment and material sales.

They also argue that such a move would "contribute to a growing perception" that the delivery of US goods is "unreliable" and hit US market share worldwide.

"We urge the department to carefully consider the immediate and long-term detrimental impacts to US industry, economic and national security that may result from the addition of SMIC to the Entity List," said the group, which boasts 2,400 members worldwide.

The Commerce Department did not immediately respond to a request for comment.

Joe Pasetti, SEMI's vice-president of global public policy at SEMI, said "We don't comment on draft letters leaked to the press."

Reuters reported earlier this month that the Defense Department was working with other agencies to determine whether to add SMIC to the Commerce Department's so-called entity list, which would force US suppliers to seek hard-to-get licenses before shipping to the company. Shares of the company plunged by nearly a quarter on the news.

While the official did not reveal the motive for the proposed action, SMIC's relationship to the Chinese military is under scrutiny, sources told Reuters, as the administration increasingly trains its focus on China's military muscle.

The entity list has been used as a key tool by the administration to hammer Chinese companies under scrutiny in Washington.