OPEN APP
Home >Companies >News >US blacklists Xiaomi, 10 other Chinese companies

Xiaomi Corp. plunged 11% after the Trump Administration blacklisted China’s No. 2 smartphone maker and 10 other companies, broadening efforts to undercut the expansion of the country’s technology sector.

The U.S. has targeted scores of Chinese companies for the stated purpose of protecting national security, but going after Xiaomi is a surprise. The Beijing-based company has been viewed as China’s answer to Apple Inc., producing sleek smartphones that draw loyal fans with each new release. The company, which vies with Huawei Technologies Co. for the title of China’s No. 1 mobile device brand, also makes electric scooters, earphones and smart rice cookers.

Also Read | Covid far from over in some states

Xiaomi was co-founded by billionaire entrepreneur Lei Jun about 10 years ago, with U.S. chipmaker Qualcomm Inc. as one of the earliest investors. It’s since expanded well beyond China’s borders, particularly into Europe and India, becoming one of the country’s more recognizable brands. It surpassed Apple in global smartphone sales in the third quarter, according to the International Data Corporation, and joined Hong Kong’s benchmark Hang Seng Index in September. A spokesperson for Xiaomi had no immediate comment.

The Trump administration’s blacklistings have focused on Chinese companies with military ties and strategic value to the industry’s growth. Semiconductor Manufacturing International Corp., China’s largest chipmaker and critical to the country’s ability to build a self-sufficient tech industry, was included in December.

The move against Xiaomi sent its suppliers south on Friday: FIH Mobile Ltd., which helps it assemble smartphones, plunged as much as 14% after a strong rally in recent days. Component suppliers including Largan Precision Co., Sunny Optical Technology Group Co. and AAC Technologies Holdings Inc. also fell. Spreads on Xiaomi’s dollar bonds widened as much as 40 basis points Friday morning, according to credit traders.

Despite Friday’s selloff, some investors held out hope that the incoming administration will reverse actions taken in the twilight days of Donald Trump’s presidency. The White House also blacklisted China’s No. 3 oil company, China National Offshore Oil Corp., on Thursday.

“This is not going to be a priority for the Biden administration. This ruling will be reversed before November, so we are going to hold, and not just hold but be a buyer on this weakness," Vanessa Martinez, a partner at Lerner Group, told Bloomberg TV. “This is just like that last parting shot against China by the Trump administration."

In the latest actions, the Defense and Commerce departments released new targets just hours apart. In the Defense list of nine companies, Xiaomi is joined by lower profile firms, including Luokong Technology Corp., Gowin Semiconductor Corp. and Global Tone Communication Technology Co. Advanced Micro-Fabrication Equipment Inc. is publicly traded in the mainland. They join index stalwarts like China’s three biggest telecom firms on the list.

The Defense move identifying companies as having ties to the Chinese military means American investors will be prohibited from buying their securities, and will have to divest their holdings by November. The Commerce Department’s blacklisting is more severe and prohibits American firms from supplying those entities. Companies identified as threats were CNOOC, the nation’s main deepwater explorer, and Skyrizon, which develops military equipment.

The news was “really surprising to me," said Kevin Chen, a Hong Kong-based analyst at China Merchants Securities Co. “Many investors would choose to lock in profit since the stock rallied a lot in the past year. But I think the impact on Xiaomi would be more sentimental than fundamental. These declines could be short-lived."

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperMint is now on Telegram. Join Mint channel in your Telegram and stay updated with the latest business news.

Close
×
Edit Profile
My ReadsRedeem a Gift CardLogout