U.S. Blacklists Xiaomi in Widening Push Against China Technology

(Bloomberg) -- The Trump Administration blacklisted Chinese smartphone maker Xiaomi Corp. and 10 other companies as it broadened efforts to undercut the expansion of the country’s technology sector. Xiaomi shares plunged.

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 rabid fans with each new release. It also makes electric scooters, earphones and smart rice cookers.

Xiaomi was co-founded by billionaire entrepreneur Lei Jun about ten years ago, with U.S. chipmaker Qualcomm Inc. as one of the earliest investors. 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.

In the latest actions, the Defense and Commerce departments released new targets just hours apart, in the waning days of Donald Trump’s presidency. 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.

The Defense move identifying companies as having ties to the Chinese military means American investors will be prohibited from buying their securities.

The Commerce Dept.’s blacklisting is more severe and prohibits American firms from supplying those entities. Companies identified as threats are China National Offshore Oil Corp., the nation’s main deepwater explorer, and Skyrizon, which develops military equipment.

Xiaomi’s ADRs tumbled more than 9% in U.S. trading. Its primary listing is in Hong Kong.

Xiaomi surpassed Apple in smartphone sales in the third quarter, according to the International Data Corporation. It joined Hong Kong’s Hang Seng Index in September after grabbing market share from Huawei Technologies Co. as U.S. sanctions on Huawei deepened.