Chinese manufacturers of electronic components are at the center of tensions between the United States and China. 36 companies including Yangtze Memory Technologies have just been added to the US Department of Commerce’s notorious trade blacklist.
Relations between the United States and China are at an impasse. By dint of applying restrictions from one side or the other, a step back seems impossible for the two countries given that the list of sanctions is long. Just this week, the Biden administration announced plans to place Yangtze Memory Technologies (YMTC) and 35 other Chinese companies on a trade blacklist called the Entity List that would prevent them from purchasing certain US components. Bloomberg indicates that a source familiar with the matter confirms the US Department of Commerce’s extension of the list this week. The two economic superpowers are not at the first attempt on the matter, the United States has already used this means to blacklist competitive Chinese companies and strike a blow at their businesses on American soil.
YMTC, recently described as the new technology leader of the sector by the TechInsight company, was specifically to produce memory chips for Apple terminals. The Cupertino company initially announced its plan to sign a contract with this Chinese subcontractor cheaper than the competition, before giving up. The company is notably accused of maintaining very close ties with the Chinese government and the country’s military. According to a Nikkei Asia article published on Oct. 17, the company has become entangled in the web of US restrictions on Chinese manufacturers. Last October, it was already on the list of unverified entities. In simple terms, this means that no design, technology, specification or document can be shared with the company. American employees, who worked in core technical positions within YMTC, were also forced out of the company. Other Chinese companies have borne the brunt of these restrictions, such as Huawei Technologies or Semiconductor Manufacturing International Corporation (SMIC).
A long-term showdown between the two countries
As a reminder, companies on the US blacklist, called the “Entity List” (or trade blacklist), cannot purchase technology from American suppliers unless they obtain a special export license from the American Department of Commerce. By preventing certain components from being purchased, targeted companies could see their supply chains disrupted and their businesses diminished. Last August, the president of the United States, Joe Biden, signed the law in support of the semiconductor industry, the Chips and Science Act. This was approved by Congress last July and provides for the release of a budget of 52, $4 billion in subsidies. The goal is clear: to tackle the shortage of chips and reduce the country’s dependence on China.
Reuters reports that during a Chinese foreign ministry briefing on Thursday, spokesman Wang Wenbin said he had urged the United States to stop engaging in unfair and discriminatory practices against some Chinese companies. “China will continue to defend the legitimate and justified interests of Chinese enterprises,” he added. However, a pro-Beijing gesture was made by the Biden administration. Several Chinese companies will soon be removed from a so-called “unverified” business list, also known as a business red list. Their number and names have not yet been revealed. When a company is placed on this unverified list, it means that US authorities are unable to prove that those companies are not related to the Chinese government or its military. This measure triggers a 60-day countdown during which companies will have to prove that their activities do not endanger US national security. The country then conducts site visits to determine whether it can trust them to receive exports of sensitive US technology. Such US inspections in China require approval from China’s Ministry of Commerce. When a company is blacklisted, it is often an intermediate step before being blacklisted, such as YMTC.
We also recall that China filed a dispute with the World Trade Organization (WTO) this week in a bid to roll back US-imposed trade controls, arguing they will disrupt global trade.
