Chinese chip tool maker AMEC sues US defence department over 'military company' designation

Chinese chip equipment maker Advanced Micro-Fabrication Equipment (AMEC) has filed a lawsuit against the US defence department (DOD) over suggestions it is tied to the Chinese military, demanding that it be removed from a blacklist that has damaged its business.

Shanghai-based AMEC, a maker of etching systems used by semiconductor foundries, said the DOD's move of designating it as a "Chinese Military Company (CMC)" at the start of the year was made without legal basis and had caused it "serious and irreparable" harm, according to a complaint filed to the US District Court for the District of Columbia on Wednesday.

In January, the US DOD added a number of Chinese companies, including AMEC, to its CMC list, which names firms it identifies as a threat to US national security and bars them from doing business with some American firms.

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In response to AMEC's request for additional information, the DOD "provided a single basis" for adding it to the blacklist, which was an award the company received in 2019 from the Ministry of Industry and Information Technology, AMEC said in the lawsuit.

AMEC chairman and CEO Gerald Yin Zhiyao. Photo: Handout alt=AMEC chairman and CEO Gerald Yin Zhiyao. Photo: Handout>

"We are deeply shocked by the designation of AMEC again on the military-related list by the DOD. Such designation was wrong and groundless," AMEC's chairman and CEO Gerald Yin Zhiyao said in a statement posted on Chinese social media platform WeChat on Friday.

As Beijing has pushed for technological self-sufficiency amid rising geopolitical tensions with Washington, Chinese semiconductor firms have raked in subsidies meant to bolster the domestic supply chain. Subsidies to AMEC rose nearly 22 per cent last year to 124.4 million yuan (US$17.4 million). Among 25 of the country's most notable chip firms, subsidies were up 35 per cent, according to a South China Morning Post analysis.

The DOD had designated AMEC as a Chinese military company in 2021, but removed it from the list later that year, the company said. Yin urged the US court to order the DOD to remove it from the list again, according to the statement.

AMEC, one of the biggest chip-making tool manufacturers in China, reported a 32.1 per cent revenue jump in 2023 from the previous year, thanks to strong domestic demand. Its net profit in 2023 surged 52.6 per cent year on year, according to its latest annual report.

But the US blacklist is still "significantly detrimental" to its business, the company said. The majority of its key suppliers, business partners and customers are either located in the US or subject to restrictions under US laws and regulations, it said in its lawsuit.

In a panel discussion on China's chip supply chain last month, Yin said 60 per cent of parts used in his company's etching tools were procured domestically.

In its latest complaint, the AMEC wrote that its "US expansion efforts, which had been planned for years and were well under way, have come to a halt".

AMEC did not immediately respond to an emailed request for comment on Friday.

Hesai Technology, a Chinese maker of remote sensors used in smart cars that was also added to the Defence Department blacklist in January, will be removed from the list, according to a report by Financial Times earlier this week.

In 2021, Chinese consumer electronics giant Xiaomi filed a lawsuit against the DOD, which also designated the firm as having ties with the Chinese military, prohibiting US investors from owning its shares. Xiaomi managed to have itself removed from the list after a US court supported the company request and ordered the ban overturned.

Additional reporting by Che Pan

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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