Chinese smartphone maker Xiaomi is the latest to be added to the Trump administration’s military blacklist. On Thursday, the Department of Defense added nine companies to its list of alleged Chinese military companies, including Xiaomi.
Xiaomi was the world’s third-largest smartphone maker as of Q3 last year, coming ahead of Apple and trailing behind Samsung and Huawei, according to market researcher IDC.
In November, President Donald Trump signed an executive order, which was set to take effect in January, to bar investment in companies designated as supporting efforts of China’s military, intelligence and security apparatuses. Huawei, China’s major chipmaker SMIC and the country’s three largest telecoms operators are among the targets of the list.
The military blacklist is different from the Commerce Department’s entity list, which famously cuts Huawei, DJI, SenseTime and other Chinese tech firms off their U.S. suppliers over national security concerns.
Xiaomi “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 [National Defense Authorization Act]. The company will take appropriate course of actions to protect the interests of the company and its shareholders,” a Xiaomi spokesperson said in a statement.
Like the entity list, the U.S. government’s military blacklist has caused confusion around compliance. In response to the sanctions on China Mobile, China Unicom and China Telecom, the New York Stock Exchange made three moves. It first announced to delist the three Chinese telcos, then decided not to after consultation with regulators, but eventually reversed its reversal and said it would delist them, after all, upon further evaluation.
“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 Xiaomi representative said.
Xiaomi is listed in Hong Kong, and the executive order could force American investors to divest their holdings in the phone maker, whose shares tumbled more than 11%, to $29 apiece, on the blacklist announcement.
While Xiaomi’s operations and technology access are unaffected in the latest round of U.S. government assault, a supply chain ban could become a sword of Damocles. The Chinese phone maker has been working closely with Qualcomm and was notably the first to get the high-end Snapdragon 888 chips. To evade restrictions imposed by the entity list, Huawei spun out its budget phone unit Honor in a bid to save its supply chain. It remains to be seen how Joe Biden will tackle Trump-era policies towards Chinese tech giants.