In its recent move to safeguard national security, the United States’ Trump Administration has decided to go after China’s second-biggest smartphone marker Xiaomi Corp. along with 8 other companies of Chinese-origin and blacklist them.
The Department of Defense has released the names of companies that are alleged to be “Communist Chinese military companies” operating directly or indirectly in the United States.
Xiaomi which is often viewed as China’s answer to the U.S. based Apple Inc. produced smartphones in the budget-range and mid-range segment and has a growing loyal user base. The Chinese-foreign company competes with that of Huawei Technology to gain the title of China’s biggest mobile device brand and also makes other consumer electronic products such as earphones, smart rice cookers, electric scooters and so on.
In Q3 2020, the Xiaomi surpassed Apple in global smartphone market in terms of shipments and joined the Hang Seng Index – Hong Kong’s benchmark in the month of September.
The U.S. President Donald Trump signed an executive order in November 2020 to prevent investment in companies which were classified as agents supporting China’s military efforts, intelligence and security monitoring. Huawei, SMIC – China’s major chipmaker, and the country’s three biggest telecoms operators made it among the targets of the list and now Xiaomi has been added to the same.
Note here that the military blacklist is very much different from the US Commerce Department’s entity list which has cut Huawei, DJI, SenseTime among other Chinese tech firms off their U.S. suppliers over national security concerns as well.
A Xiaomi spokesperson, in a statement about the recent move from the U.S. administration, said that their company is neither owned, controlled nor affiliated with the Chinese military and is therefore not defined under the NDAA aka Nation Defense Authorization Act’s Communist Chinese Military Company.
The spokesperson also mentioned that Xiaomi will be taking the appropriate course of actions in order to protect its own interests along with that of its shareholders.
U.S. Military Blacklist: More Compliance Confusion?
The U.S. government’s military blacklist, much like that of the entity list of the Commerce Department, caused a lot of confusion around compliance. The NY Stock Exchange, in response to the sanctions made on China Mobile, China Unicom and China Telecom made three moves. It first went ahead and decided to delist the three Chinese telcos and then changed it after consultation with regulators, but then once again reversed their previous reversal and said it it would delist them.
Now, as Xiaomi is likely to face a similar conundrum very soon, the spokesperson said that the company is currently busy reviewing the potential consequences of the situation and that they will make further announcements as and when they deem it to be appropriate.
All in all, while it is true that Xiaomi’s operations and technology access still remains unaffected by the Trump administration’s recent assault, a ban on their supply chain can become a serious problem going forward.
Xiaomi has been working very closely with Qualcomm and was one of the first smartphone makers to be able to get the high-end Snapdragon 888 chips. To evade similar restrictions imposed by the entity list, Huawei let go of its budget phone unit Honor in order to salvage its supply chain. It now remains to be seen how Xiaomi tackles the situation. We will keep you updated on all future developments. Until then, stay tuned.