US targets Chinese chip maker for security reasons

The Trump administration has imposed heavy restrictions on US companies collaborating with the Chinese semiconductor company Fujian Jinhua, adding a new front to the trade war between Washington and Beijing.

The US Department of Commerce spoke of "national security" when it announced the decision on Monday, highlighting the latest concern in Washington about the development of sensitive technologies by China.

US authorities are demanding that China abandon practices such as forced technology transfer and intellectual property theft in exchange for removing the $ 250 billion tariff on Chinese imports received earlier this year. However, there is no sign of a breakthrough ahead of a meeting between Chinese President Xi Jinping and his American counterpart Donald Trump in November on the sidelines of the G20 summit in Argentina.

In a statement, the US Department of Commerce said that Fujian Jinhua was "on the verge of completing a significant production capacity for dynamic random access memory (DRAM) ICs." She adds that "additional production", which probably comes from "technology of US origin" – threatens the "economic viability" of US military suppliers.

"When a foreign company embarks on activities contrary to our national security interests, we will take strong action to protect our national security," said US Trade Secretary Wilbur Ross.

Fujian Jinhua has been placed on the "list of entities" of US export regulations, which means that a license would be required for all "exports, re-exports and transfers of products, software and technology" to the company Chinese. Applications would be "reviewed with a presumption of refusal," the Commerce Department said.

Fujian Jinhua did not respond to a request for comment.

The Chinese company is in a legal dispute with Micron, an American chip maker who accused it of stealing its technology. According to an indictment in a Taiwan court, two engineers from Rexchip, a memory chip manufacturer acquired by Micron in 2013, left the company in 2015 to join United Microelectronics, one of the largest manufacturers of chips from Taiwan, which signed a cooperation agreement with Fujian Jinhua. in 2016.

Micron says engineers have entrusted Micron's technology to UMC and Fujian Jinhua. Both companies denied the allegation.

The action against Fujian Jinhua is Washington's latest use of export control tools targeting Chinese companies and institutions accused of stealing Western technology. This comes as the US government revises the measures at its disposal, seeking to create tools to limit China's acquisition of technologies that may challenge US economic and military leaders.

US companies and officials have long disapproved of China's desire to build its own technology centers to compete with Silicon Valley.

Chinese chip makers have received billions of dollars in public subsidies under the Made in China 2025 program, an initiative to make the country a world leader in technology industries ranging from electronic vehicles to robotics. Beijing has mobilized massive venture capital funds to incubate national champions in these strategic sectors, including a state-run 139 billion rubles ($ 20 billion) fund specifically for the semiconductor industry. .

Fujian Jinhua's support includes the Fujian Provincial Government, which helped the company expand its plants on China's southeastern coast.

The company was founded by an electronic centric company specializing in DRAM memory, a type of memory chip common to phones and computers allowing devices to quickly access stored information. It is building a $ 5.7 billion microchip plant in Jinjiang, a city in eastern Fujian Province, which will be the largest facility of its kind in China. The first phase of the plant was put online in September and aims to produce $ 1.6 billion in memory chips a year, according to state media.

"The company considers that it is his duty to manufacture integrated circuit chips in the country," Fujian Jinhua wrote on his website.

Washington's action against Fujian Jinhua echoes an initiative earlier this year to restrict exports to ZTE, a Chinese telecom equipment company. It shows how much national security concerns with China are overflowing into the trade dispute. After a turnaround on the part of the US administration and a new regulation, the export restrictions were lifted for ZTE.