The United States announced that 36 Chinese companies will be included in the trade blacklist.

(Reuters)

[Instant News/Comprehensive Report] The United States has stepped up its attack on China's chip manufacturing industry.

The Biden administration announced on Thursday local time that 36 Chinese companies, including China's leading memory chip maker Yangtze River Storage, were included in the trade blacklist.

According to comprehensive foreign media reports, YMTC is China's largest manufacturer of 3D storage flash memory (3D NAND), supplying memory chips needed for computer devices such as smartphones. The company has been negotiating supply cooperation with Apple.

The U.S. is worried that YMTC will transfer U.S. technology to companies such as Huawei and Hikvision, which have previously been blacklisted. If they do not obtain special permission in the future, suppliers will be prohibited from shipping goods from the United States to YMTC.

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Of the 36 banned Chinese companies, 21 are major artificial intelligence chip supply chain manufacturers, including Cambrian Technology and China Electronics Technology Group.

Another nine are accused of supporting China's military modernization, such as Shanghai Microelectronics Equipment, the only lithography company in China.

Then there is Tiandi Weiye, a Chinese surveillance camera manufacturer accused of participating in a series of persecutions against Uyghurs in Xinjiang, mass incarceration and the use of high-tech surveillance.

Thea Kendler, assistant secretary of commerce for export administration, said in a statement that as the Chinese government seeks to remove barriers in the military and civilian spheres, "U.S. national security interests depend on our making critical decisions to deny access to way to advanced technology."

In this regard, the Chinese embassy in Washington criticized the U.S. actions as blatant economic coercion and bullying in the field of science and technology. "China will firmly defend its legal rights and the interests of Chinese companies and institutions."

The Chinese Embassy in Washington said the United States was engaging in "blatant economic coercion and bullying in the field of technology," undermining normal business activities between Chinese and American companies and threatening the stability of global supply chains.

"China will resolutely safeguard the lawful rights and interests of Chinese companies and institutions," it added.

The move builds on sweeping export controls imposed on Beijing in October to slow Beijing's technological and military advances, including measures to curb China's access to US chipmaking tools and cut it off from certain chips made anywhere in the world with American equipment.

It also comes as Congress prepares to finalize legislation to bar the US government from buying products that contain semiconductors made by YMTC, Chinese memory chipmaker CXMT or China's top chip manufacturer SMIC.

SMEE did not immediately respond to a request for comment.

A total of 35 Chinese entities were added to the US trade blacklist, known as the entity list, as well as YMTC's Japan-based subsidiary.

Thursday's announcements weren't all bad news for Beijing. The Biden administration removed a subsidiary of Wuxi Biologics, a company that makes ingredients for AstraZeneca's (AZN.L) COVID-19 vaccine, and 26 other Chinese entities from the so-called unverified list thanks for successful site visits.

Two of the Chinese companies removed from the unverified list - YMTC and SMEE - were added to the entity list.

Reuters reported on Wednesday that such a move was in the works. Reuters also reported earlier this year that US officials were able to conduct a site visit at Wuxi Biologics before a different subsidiary of the company was removed from the unverified list in October.

Wuxi did not respond to a request for comment.

Companies are added to the unverified list if the United States cannot complete on-site visits to determine whether they can be trusted to receive sensitive US technology exports, inspections which in China require approval from the commerce ministry.

Being added to the unverified list forces US suppliers to perform greater due diligence before shipping to the targeted companies.

Commerce Department officials have attributed greater cooperation from Beijing in site checks to a new US rule announced in October. Under that rule, if a government prevents US officials from conducting site checks at companies on the unverified list, Washington may add them to the list after 60 days.

Under that new policy, the Commerce Department on Thursday removed nine Russian entities from the unverified list and added them to the entity list because the US has been unable to conduct site visits.

Top Senate Democrat Chuck Schumer heralded the imposition of new penalties on YMTC, which Reuters reported was under investigation for allegedly violating US export regulations by supplying chips to Huawei without a license.

"YMTC poses an immediate threat to our national security, so the Biden Administration needed to act quickly to prevent YMTC from gaining even an inch of a military or economic advantage," he said in a statement.

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