US-China trade war heats up over 5g

On Monday, the U.S. Department of Commerce announced that it added eight Chinese technology companies to its Entity List. Consequently, the Trump administration has forbidden American firms from doing business with Hangzhou Hikvision Digital Technology, Zhejiang Dahua Technology, SenseTime Group Ltd., Megvii Technology, iFlytek, Xiamen Meiya Pico Information, Yitu Technology, and Yixin Science and Technology.

Notably, the federal government didn’t blacklist the above firms because of their perceived status as a threat to national security as it did with Huawei in May. Instead, the Commerce Department alleges that these corporations participated in the human rights abuses taking place in China. The agency claims that the firms helped facilitate the “repression, mass arbitrary detention, and high-technology surveillance” of the region’s Muslim minority groups.

A Commerce Department spokesperson said that the new sanctions are “unrelated to trade negotiations.” However, the organization’s actions have had an immediate negative impact on a few U.S. semiconductor companies that trade with Chinese businesses.

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The Commerce Department’s Allegations

Though the Commerce Department is charging the eight newly blacklisted companies with the same bad acts, they don’t all operate in the same industry.

For instance, Bloomberg reports that Hikvision and Dahua represent one-third of the world’s video surveillance market. The Trump administration put the two firms on the Entity List for giving the Sino government tools to surveil Chinese Muslims in the nation’s Xinjiang autonomous territory.

Furthermore, U.S. authorities have moved against artificial intelligence (AI) giants SenseTime and Megvii because Beijing has used their technology to power its sprawling state facial recognition apparatus. The agency similarly penalized Yitu, a smaller AI firm, alongside its larger competitors. It also sanctioned Xiamen and Yixin for providing Chinese police with Big Data analytics services.

The Trump administration’s latest trade bans also affected iFlytek, a natural language processing firm that offers AI-enabled surveillance services on the side.

Impact on the American Semiconductor Industry

As a result of the globalized modern marketplace, the Commerce Department’s sanctions will impact several U.S.-based semiconductor companies. For instance, SenseTime uses both Nvidia and Qualcomm chips to power its AI. Unless those firms’ components are granted exemption from the government’s trade ban, they both lost a significant client. Also, Reuters reports that Hikvision counts Ambarella, Intel, Nvidia, Seagate, and Western Digital among its suppliers.

The Trump administration’s recent trade ban announcement has already inflicted economic damage on American chipmakers. Following the government’s restriction declaration, Qualcomm’s stock price fell by 4.6 percent while Arabella lost 13.5 percent of its value. The Motley Fool notes that Hikvision represents 15 percent of the latter company’s business. Similarly, Nvidia’s market capitalization has fallen by 3.9 percent.

It’s worth noting that the Trump administration moved against the eight Chinese firms right before another round of Sino-American trade talks. On October 15, Chinese Vice Premier Liu He is set to engage in another round of negotiations in Washington.

On Tuesday, China’s Foreign Ministry issued a statement slamming the U.S. for interfering in its national affairs. In response, a member of the press asked the agency if retaliatory action will be forthcoming. A spokesperson ominously replied, “Stay tuned.”

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