Xiaomi and eight other Chinese companies have been blacklisted by the U.S. Department of Defense. Last year, Huawei’s dream to become the world’s largest smartphone brand was cut short when it was added to the Entity List in the U.S. And now, the U.S. government has blacklisted Xiaomi and eight other companies and calls them “Communist Chinese military company.”
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On January 20th, the newly elected U.S. President Joe Biden’s administration will come into power. Until then, the Trump administration is exercising its powers in its last moments. The new decision taken by the Trump administrator prevents U.S. investors from investing in the firms that are included in the blacklisted companies. Reuters reported that the American investors are required to divest their holdings from the blacklisted companies by November 11th this year.
Xiaomi gets blacklisted in the U.S.
Citing links with Communist Chinese military companies, the US govt has blacklisted Xiaomi
There is no official word on how Xiaomi is linked with the Communist Chinese military companies as it is only a consumer electronics brand. Commenting on the issue, a Xiaomi spokesperson said, “The Company has been in compliance with law and operating in compliance with the relevant laws and regulations of jurisdictions where it conducts its businesses. The Company reiterates that it provides products and services for civilian and commercial use.”
”The Company confirms that it is not owned, controlled, or affiliated with the Chinese military, and is not a “Communist Chinese Military Company” defined under the NDAA. The Company will take appropriate course of actions to protect the interests of the Company and its shareholders. The Company is reviewing the potential consequences of this to develop a fuller understanding of its impact on the Group. The Company will make further announcements as and when appropriate,” the spokesperson added.
Huawei, SMIC (semiconductor technology), and drone maker DJI are some of the companies that are included in the blacklist. Readers should know that the U.S. govt has not imposed an outright trade ban on Xiaomi. Chinese companies like Huawei and DJI are prevented from availing technology from the U.S. without a license. However, at present Xiaomi can continue to use U.S technologies without acquiring a license.
Getting blacklisted will certainly affect Xiaomi’s stock price, but the company can continue to function normally as their supply chains are not affected. Companies that are mentioned in the Entity List have faced serious consequences. For instance, Huawei, which is included in the Entity List is barred from selling Android phones with Google Mobile Services (GMS). Also, it is unable to produce Kirin chipsets to power its smartphones as it was relying on U.S-based technologies to manufacturer them.
There is a possibility that the upcoming Biden administration may remove Xiaomi from the blacklist. Only time will tell whether Xiaomi continues to face more problems or overcomes without much damage to its business.