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Proposed US rule to ban government procurement of products containing SMIC, CXMT, and YMTC chips
Friday, February 13, 2026 at 02:06 PM
A new US proposal seeks to prohibit government agencies from procuring products or services that utilize chips manufactured by SMIC, CXMT, or YMTC. The proposed regulation is currently open for public commentary with a deadline set for April 20, 2026.
Context
The U.S. government is advancing a federal ban on semiconductors manufactured by SMIC, CXMT, and YMTC, citing national security risks. Mandated under Section 5949 of the 2023 National Defense Authorization Act, the policy prohibits federal agencies from procuring any electronic parts or services that incorporate chips from these entities. While the final implementation rules were finalized in late 2025, the total prohibition for agencies and their contractors is set to take full effect on December 23, 2027, requiring a massive audit of global supply chains.
This ban represents a critical pivot for investors as it targets not only direct components but also secondary "use" in finished products. Industry data suggests that roughly 20% of semiconductors in current defense contractor systems are non-compliant, necessitating costly "rip-and-replace" or redesign efforts. The pressure on SMIC and CXMT is further compounded by recent enforcement actions, including a $252 million fine against Applied Materials in February 2026 for illegal shipments and a new 25% tariff on advanced AI chips that incentivizes a shift toward domestic manufacturing.
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