Shanghai company sues US Defense Department

Shanghai-based semiconductor maker Advanced Micro-Fabrication Equipment Inc has filed a lawsuit with a court in the United States against the US Department of Defense for including the firm on the list of "Chinese military companies", AMEC said on Friday.

AMEC said on its official WeChat account that the DOD's decision to include the company on the list is wrong, incongruent with facts, lacks a legal basis and is contrary to due process. AMEC's reputation has been seriously impaired by the decision. Therefore, AMEC has asked the court to order the DOD to revoke this "erroneous decision".

In January, the DOD added AMEC to the list which the department claimed was "in accordance with Section 1260H of the National Defense Authorization Act for Fiscal Year 2021", also known as the 1260H List.

The list was released on June 3, 2021 to restrict access by Chinese companies operating in the US to some defense contracts if they are allegedly aiding China's military. The list was revised on Oct 5, 2022 and Jan 31 this year. A total of 73 Chinese companies were included on the list upon the latest revision.

Ever since then, AMEC has made every effort to communicate with the DOD to clarify the facts and provide ample evidence showing that it does not meet the criteria of the list. AMEC strictly follows laws and regulations both at home and abroad. It has never taken part in any military-related activities, the company stated in the announcement.

Requests to be removed from the list have been made, but they were not realized as of the date of the lawsuit, AMEC said in the Friday announcement.

"We were shocked to find us included on the DOD's military-related list, again. The decision is wrong and unfounded," AMEC Chairman Yin Zhiyao said on Friday.

"We believe that the court will make a fair decision to remove AMEC from the list. At the same time, we are willing to continue communication with the DOD to resolve the existing disputes amicably and appropriately," said Yin.

Shanghai-based Hesai Technology, the world's largest maker of laser sensors for electric cars, was included on the 1260H List in late January. The DOD's explanation was that Hesai allegedly posed a threat to US national security.

Nasdaq-listed Hesai sued the DOD in May, saying that there was no evidence showing the company is connected to the Chinese military and described the DOD's move as "arbitrary and capricious". According to a Financial Times' report on Tuesday, the DOD has decided to remove Hesai from the blacklist, quoting people familiar with the matter, who said Hesai's inclusion "did not hold up to legal scrutiny under the criteria outlined in the 2021 legislation".

Ji Jianjun, a researcher at the Chinese Academy of Macroeconomic Research, said that geopolitical tensions, especially aggravated external competition in the short run, has created challenges for Chinese manufacturers, but Chinese companies have thus accelerated their climb up the manufacturing value chain by stabilizing the supply chain and producing more high-end products.

Over the longer term, changes in geopolitical relations cannot reverse the major trend of globalization, the comparative advantages of Chinese manufacturing, and Chinese companies' integration into the global supply and value chains, Ji said.