On Thursday, the Ministry of Defense added nine more companies to its list of alleged Chinese military companies, including Xiaomi.
Xiaomi, the Chinese smartphone maker, is the latest to be added to the Trump administration’s military blacklist.
The military blacklist differs from the Commerce Department’s Entity List, which is notorious for cutting Huawei, DJI, SenseTime and other Chinese tech companies from its US suppliers due to national security concerns.
According to market researcher IDC, Xiaomi was the third-largest smartphone maker in the world, ahead of Apple, followed by Samsung and Huawei, as of the third quarter of last year.
The outgoing President Donald Trump signed an executive order in November, which was to come into effect in January, to ban investment in companies classified as supporting the efforts of the Chinese military, intelligence, and security services.
A Xiaomi spokesman said in a statement that the company will take appropriate measures to protect the interests of the company and its shareholders.
Xiaomi asserts that “it is not owned, controlled or affiliated with the Chinese military, nor is it a designated“ Chinese Communist Military Corporation ”under the NDAA [National Defense Authorization Act].
“The company is reviewing the potential consequences of this in order to develop a fuller understanding of its impact on the group. A Xiaomi representative said that the company will make more announcements as appropriate.”
The US government military blacklist has caused as much compliance confusion as the entity list.
In response to the sanctions imposed on China Mobile, China Unicom and China Telecom, the New York Stock Exchange took three steps. It initially announced the delisting of the three Chinese telecom companies from the lists, then decided not to do so after consulting with regulators, but eventually reversed it and said it would delete it, after all, upon further evaluation.
Xiaomi is listed in Hong Kong, and the executive order could force US investors to liquidate holdings in the phone maker, whose shares fell more than 11% to $ 29 each in the blacklisting announcement.
While Xiaomi’s operations and access to technology were unaffected in the latest round of the US government offensive, the supply chain blocking could become a sword of Damocles.
The Chinese phone maker works closely with Qualcomm and was in particular the first to acquire the cutting-edge Snapdragon 888 chipset.
To evade the restrictions imposed by the entity list, Huawei has taken out the budget phone unit Honor in an effort to save its supply chain.
It remains to be seen how Joe Biden and his new administration will deal with the Trump-era policies toward Chinese tech giants.