The US Department of Defense claims Xiaomi — along with the other 8 companies — is part of China’s ‘Military-Civil Fusion development strategy’, through which the People’s Liberation Army (PLA) uses the advanced technologies and expertise acquired and developed by civilian PRC companies, universities, and research programs.
According to an executive order signed by outgoing US President Donald Trump in November last year, US investors will no longer be able to invest in Xiaomi and the other eight companies. Not only are people banned from purchasing new securities and shares of these companies, but those with existing holdings will also have to divest the same by November 11th, 2021. The November order states China is “increasingly exploiting United States capital to resource and to enable the development and modernization of its military, intelligence, and other security apparatuses, which continues to allow the PRC to directly threaten the United States homeland and United States forces overseas.”
Xiaomi currently receives a large amount of investment from US-based companies, including Qualcomm Inc, which is one of the world’s largest smartphone chipset suppliers. The Chinese company recently worked closely with Qualcomm on the Xiaomi Mi 11 – which was launched in China late last month as the world’s first commercial phone with the Snapdragon 888 5G chipset.
Xiaomi shares plunged 11 percent on Friday following the announcement. Unless the US government reverses the blacklisting, the company risks being deleted from US exchanges as well as global benchmark indexes. With just a week left before President-elect Joe Biden’s administration takes power, there is hope that the decision to blacklist Xiaomi might be reversed.
The US DoD defines Communist military companies as “any person identified in the Defense Intelligence Agency publication numbered VP-1920-271-90, dated September 1990, or PC-1921-57-95, dated October 1995”, as well as “any other person that – (i) is owned or controlled by the People’s Liberation Army and (ii) is engaged in providing commercial services, manufacturing, producing, or exporting.”
This is not the first time the US government has blacklisted Chinese companies for having ties with the Chinese military. To date, the US Department of Defense has blacklisted over 60 Chinese companies including Chinese smartphone and telecom giant Huawei, China’s largest chipmaker Semiconductor Manufacturing International Corp. (SMIC), security systems and IoT solutions manufacturer HikVision, and China Electronics Corporation, which is amongst the largest producers of telecom equipment in China.
Xiaomi has been blacklisted by the US Department of Defense
US investors will no longer be able to invest in the Chinese tech company
Xiaomi is not in the same position as Huawei though and will continue to have access to Android