US Government Tightens Grip on Chinese Firms: Blocking SenseTime Investments and Strengthening SMIC Regulations

Acceleration of Tech Hegemony Competition Between the US and China
Expansion Expected in Blacklisting of Chinese Companies

U.S. President Joe Biden is delivering a speech on the inflation situation and supply chain disruptions on the 1st (local time) at the South Court Auditorium in the Eisenhower Executive Office Building on the White House grounds in Washington, D.C. Photo by Yonhap News.

[Asia Economy Reporter Minwoo Lee] The U.S. government is accelerating efforts to tighten restrictions on Chinese companies by blocking investments in major Chinese tech firms and limiting technology exports.

On the 9th (local time), The Wall Street Journal (WSJ) reported that the U.S. government is intensifying pressure on Chinese companies. Citing sources, WSJ stated that the U.S. Department of the Treasury plans to place SenseTime Group on the investment restriction "blacklist." SenseTime is a leading company in AI-based facial recognition technology and is scheduled to be listed on the Hong Kong Stock Exchange on the 17th. Through this initial public offering (IPO), it was expected to raise up to $767 million. However, due to pressure from the Treasury Department, these plans are likely to face setbacks. If included on the Treasury's investment restriction blacklist, U.S. companies and individuals will be prohibited from trading SenseTime shares.

Previously, the U.S. Treasury had placed SenseTime's subsidiary on the investment restriction blacklist, citing that its technology was used in large-scale detentions of Uyghurs in China's western Xinjiang region. SenseTime disclosed this in its IPO prospectus, asserting that "(the blacklist sanctions) do not apply to other legally separate companies within the group."

The U.S. Department of Defense has targeted China's largest semiconductor company, SMIC. According to WSJ citing sources, the Department of Defense believes there are loopholes in regulations that prevent SMIC from acquiring critical U.S. technology and plans to discuss expanding these regulations with the U.S. Department of Commerce.

Previously, the Department of Commerce regulated that certain technologies could not be exported to SMIC and its subsidiaries without licenses, targeting U.S. semiconductor equipment manufacturers. However, since this regulation is based on equipment needed to produce the latest semiconductors of 10 nanometers (nm) or smaller, it did not significantly impact SMIC, which mainly produces mid- to low-end products. WSJ reported that the Department of Defense wants to expand the regulation criteria to 14 nm.

Some Commerce Department officials and U.S. semiconductor equipment companies have stated that expanding regulations in this way would harm U.S. companies and worsen the global semiconductor supply shortage.

On the other hand, supporters of stricter regulations argue that 14 nm semiconductors are still advanced semiconductors and that this would not significantly affect the global supply of mid- to low-end semiconductors. They also emphasized that since the expansion applies only to certain semiconductor equipment items, semiconductor equipment manufacturers would not be greatly affected.

WSJ interpreted that the Biden administration views technology as the frontline in the competition for supremacy with China, which is why it is applying such pressure. It also predicted that sanctions on SenseTime and SMIC would accelerate the tightening of restrictions on Chinese tech companies. It added that more Chinese companies could be added to the blacklist next month.

This content was produced with the assistance of AI translation services.