Federal Government Looks to Ban Investments in Chinese AI Giant

Featured, National

SenseTime Group Inc. | Image from Caixin Golbal

According to a Wall Street Journal report on December 9, 2021, U.S. officials are planning on pursuing a ban on American investment in the Chinese artificial intelligence company SenseTime Group Inc.

In addition, U.S. policymakers are also seeking to prevent China’s largest chip manufacturer from purchasing U.S. manufacturing tools as a part of the Biden administration’s attempts to act against Chinese technology firms.

On December 10, 2021, SenseTime, was placed on a Treasury Department blacklist of Chinese companies that allegedly have strong connections to the Chinese People’s Liberation Army.

This move prevents Americans from investing in the company and is likely to be an obstacle ahead of SenseTime’s initial public offering in Hong Kong, which is expected to raise up to $767 million this month.

Although officials at various government agencies are calling for tougher measures against China, Commerce Department leaders are still opposed to some of the proposals because they claim they will have a negative impact on US companies.

The chip manufacturer, Semiconductor Manufacturing International Corp. (SMIC), was placed on the blacklisted entity list, which restricts companies’ ability to export US-origin technology without a license.

Under its present designation, SMIC faces restrictions on purchasing US tools “uniquely required” to manufacture chips with circuits ten nanometers and smaller.

The Defense Department is joining officials at the State and Energy Departments, along with the National Security Council, to change the language to limit SMIC’s access to items “capable of” producing semiconductors with 14-nanometer circuits and smaller.

In changing the wording to the blacklist, the list of items SMIC won’t be able to acquire will be broadened.

The Biden administration views technology as an area in which the US is competing with China.

Several Commerce Department officials are attempting to block the Defense Department’s restrictions for SMIC.

Commerce officials and US toolmakers have informed other government officials that any changes to the SMIC restrictions will negatively impact US companies’ profits and worsen a global chip shortage that has affected numerous industries.

China is a major supplier of lower-end chips.

Supporters of the Defense Department’s proposal believe that because China isn’t currently a significant manufacturer of cutting-edge chips, enacting restrictions on tools for Chinese companies to make them wouldn’t haven’t an impact on global supply.

Proponents of these restrictions argue that the tighter restrictions would only apply to a small number of the products these US companies sell.

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