The US Department of Commerce has written to US suppliers of China's largest chip maker, warning them of "unprecedented risks" that their products could be used by the Chinese military. The letter reminds companies that they must apply for licenses to ship inspected items to the Shanghai-based SMIC.
But it doesn't appear that Washington has decided whether or not to add the company to a commercial blacklist.
The SMIC denied any military ties.
And he said he has received no formal notice of new restrictions from the United States.
But the latest action caused Semiconductor Manufacturing International Corporation's shares to drop by about 7% in Hong Kong trading.
The fall followed a more marked decline earlier this month when the Pentagon first revealed it had proposed tougher restrictions on the business, including adding it to the government entity list.
This would prevent any company from selling any goods or services to SMIC involving US intellectual property without first obtaining special permission.
Such a step has already been taken against SMIC's largest customer - Huawei - which has caused major disruptions to the telecommunications kit manufacturer's business.
Chinese state media had previously reported that SMIC was among many companies that had done so
applied for a US license to continue supplying Huawei.
But an industry analyst suggested the latest move indicated the US was increasingly focused on the SMIC itself.
"The rejection of semiconductor manufacturing equipment in the United States would put SMIC at a serious disadvantage because most of that technology comes from American sources," explained Jim Tully.
"China may aim to become self-sufficient in these technologies in the long run, but it seems to me that it would take more than 10 years to do so.
"And in the short term, the equipment and related software that SMIC already uses still needs ongoing support and maintenance from its manufacturers."
This has led to speculation that SMIC's survival may now be at stake.
Sale blocked
SMIC was founded in 2000 and has since grown into the leading chip foundry in mainland China.
Until recently, he was seen as a beneficiary of the growing tension between the US and China because it was expected to benefit from Beijing's push to make the country's tech sector self-sufficient.
The company raised nearly $ 10 billion (£ 7.7 billion) this year via a share sale and other means to expand its operations.
In addition to Huawei, SMIC's customers include lesser-known Chinese chip designers including Gigadevice and Unisoc, as well as international companies including Qualcomm and Broadcom.
However, its most advanced products are said to be two generations behind what competing manufacturers - including Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung of South Korea - are able to do, because SMIC currently does not. can make transistors as small as possible. This means that its products are not suited to be the cutting edge processors in the latest smartphones or other advanced gadgets.
The reason for this is partly due to the existing restrictions Washington has imposed on the company.
At the moment, the only way to make the most advanced logic chips is to use equipment made by a Dutch company, ASML.
SMIC ordered a $ 150 million lithography machine - which uses lasers focused from giant mirrors to print tiny models on silicon - from ASML in 2018. But Reuters reported that the White House convinced the Dutch government to block export. for security reasons.
An ASML spokesperson declined to comment when asked by the BBC if the deal was still in limbo.
Adding SMIC to the list of US entities would prevent the Chinese company from purchasing hardware, software and chemical materials from other suppliers.
For now, the company hopes to avoid this by clearly denying supplying products to the People's Liberation Army.
"Any assumptions of the company's ties to the Chinese military are untrue claims and false allegations," he said.
But this has been questioned by others.
A Chinese state newspaper said the case illustrates the need for a "new long march" to "control all research and production chains of the semiconductor industry."
Bloomberg reported that Beijing plans to unveil new policies to support the industry in October.
