The shares of the integrated circuit, or chip, producer Semiconductor Manufacturing International Corp. (SMIC), which is linked to the Chinese Communist Party (CCP), plummeted 22.9 percent in Hong Kong in the face of possible U.S. Defense Department sanctions.

If SMIC is sanctioned, U.S. companies would be prevented from selling unlicensed technology to it, according to The Washington Post on Sept. 5.

“Such an action would ensure that all exports to SMIC would undergo a more comprehensive review,” said Pentagon spokeswoman Sue Gough.

The chips and technology that SMIC obtains from U.S. companies would be used by the CCP military, and by Huawei, which would try to avoid the Pentagon.

“A series of PLA [People’s Liberation Army] university and defense-industrial complex researchers use SMIC processes and chips to conduct their research, indicating that this research is tailored to SMIC production specifications, making it impossible for them to manufacture their chips at another foundry,” a report by a U.S. defense contractor said, according to the Financial Times.

In addition, SOSi, also a defense contractor, said SMIC is involved with the CCP’s defense sector, including an ongoing relationship with CETC, a state-owned developer of military electronics.

Despite its development, SMIC relies on US technology, such as software and chip manufacturing equipment.

In addition, nearly 20 billion devices will be connected to the Internet this year, including home appliances such as “smart” TVs and refrigerators, but also jet engines and cars, which could present security vulnerability, The Diplomat said.

SOSi reported that the CCP is interested in the vulnerabilities of IO (Input/Output) technology, “almost certainly to gather intelligence, perform network reconnaissance for cyberattacks, and improve its internal surveillance powers.”

The Trump administration has already sanctioned close to 300 companies linked to the CCP, such as Huawei and ZTE, in addition to the manufacturers of Hikvision surveillance cameras designated as collaborators in the suppression of China’s Uighur minority.

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