Xiaomi, one of the biggest smartphone manufacturers in China, has seen an 11% dive in stock price after being blacklisted by the US. The tech giant joined 11 firms targeted by Washington, claiming that they "posed a threat to national security."
According to the International Data Corporation, Xiaomi Corporation overtook Apple in smartphone sales in the third quarter of 2020 for the very first time in history, thanks to its wide variety of budget and high-end Android smartphones. Last year, Apple launched the iPhone 12, while Xiaomi launched its Mi 9, Mi 11, and Mi Note 10 Pro lineups.
In a statement, the US Department of Defense says that it is "determined to highlight and counter the People's Republic of China's (PRC) Military-Civil Fusion development strategy, which supports the modernization goals of the People's Liberation Army (PLA) by ensuring its access to advanced technologies and expertise acquired and developed by even those PRC companies, universities, and research programs that appear to be civilian entities."
On the other hand, Xiaomi vehemently denies that the tech giant has ties with the Chinese military.
As reported by CNBC, Xiaomi said that the company only provides products and services for commercial use and is not a 'Communist Chinese Military Company' under the National Defense Authorization Act of 1999. NDAA is legislation which Washington used to label Xiaomi as a national threat.
Founded in 2010, the Beijing-based smartphone manufacturer has gained a "Chinese Apple" reputation back in its early days. Since then, Xiaomi has named itself one of the best manufacturers that still offer premium products at affordable prices. Its latest product, Mi 11, uses Qualcomm's Snapdragon 888 5G system-on-chip mobile processor.
Beijing vs. US Administration
In fact, Xiaomi Corp is not the only company to face the consequence of the latest tension between Beijing and Washington. Following the Capitol's recent riot, things are not looking so stable for Trump's administration either.
Advanced Micro-Fabrication Equipment (AMEC), Luokong Technology Corporation (LKCO), Beijing Zhongguancun Development Investment Center, GOWIN Semiconductor Corp, Grand China Air (GCAC), Global Tone (GTCOM), China National Aviation Holding (CNAH), and Commercial Aircraft Corporation of Chian (COMAC) are the other ten companies to be blacklisted.
As Donald Trump's administration comes to an end, the White House seems to be busy ramping up its battle with China. Last November, the president issued an executive order to ban Americans from investing in the enlisted companies deemed to supply Beijing's security apparatus.
That said, US investors are now forced to divest or sell out the stakes. If none of the two actions are taken, affected holdings will be blacklisted as soon as November 11 this year.
It's still unsure whether the new president and vice president-elect will lift the restriction. Either way, it will affect the company's reputation in the long run.