(Yicai Global) Sept. 7 -- Semiconductor Manufacturing International watched its share price plunge after Reuters reported that the US government is weighing adding the biggest chipmaker on the Chinese mainland to its trade blacklist.

State-backed SMIC [HKG:0981] closed 23 percent lower in Hong Kong at HKD18.24 (USD2.35), after slumping as much as 25 percent. Its Shanghai-traded shares [SHA:688981] fell 11.3 percent to CNY58.80 (USD8.61), near the 52-week low of CNY58.66 reached earlier in the day.

The Trump administration may prohibit US firms from doing business with SMIC without a special license, Reuters reported on Sept. 4, adding that the US is looking into alleged ties between SMIC and the Chinese military.

In a Sept. 5 statement, SMIC said it was in “complete shock” over the news.The Shanghai-based firm denied any wrongdoing and said it has been “fully compliant with all rules and laws… Any assumptions of the company’s ties with the Chinese military are untrue statements and false accusations.”

SMIC is open to sincere and transparent communication with US government agencies in the hope of resolving potential misunderstandings, it added.

Founded in 2000, SMIC has wafer fabrication sites throughout the China mainland and plans to build more. The firm also has offices in Taiwan, the US, Italy, Japan and Hong Kong. It produced 5.48 million wafers last year, output that lags rival Taiwan Semiconductor Manufacturing 12 million.

The US Bureau of Industry and Security granted SMIC Validated End-User authorization in 2016.

The permit “reduces the licensing burden on industry by allowing US exporters to ship designated items to pre-approved entities under a general authorization instead of under multiple individual export licenses,” according to the BIS website. That “enables entities in VEU-approved countries to receive US-controlled products and technologies more easily, quickly, and reliably.”

Editor: Ben Armour