Xiaomi
(Xiaomi)
  • The outgoing administration of Donald Trump has added Xiaomi to a list of Chinese companies restricted from trade in the United States.
  • The US Department of Defence says, without evidence, that it is among companies that appear civilian, but is part of a Chinese military strategy.
  • Xiaomi bluntly denies that characterisation.
  • The listing is different from restrictions applied to Huawei, but could dent Xiaomi's prospects.
  • Combined sanctions applied to Chinese cellphone makers now affect brands used by about a quarter of South Africans.
  • For more stories go to www.BusinessInsider.co.za.

One in every four South Africans now uses a cellphone from a company targeted by US sanctions.

On Thursday the US Department of Defence added Chinese technology company Xiaomi to a list of "qualifying entities" it has been building since June 2020.

"The Department is determined to highlight and counter the People’s Republic of China’s (PRC) Military-Civil Fusion development strategy, which supports the modernisation 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," it said.

As in previous cases, it offered no proof for the allegation.

In November, a number of outlets reported that the administration of Donald Trump was planning on ramping up sanctions against Chinese companies – including by expanding the list on which Xiaomi now appears – before he leaves office. This, sources said, was intended to box in his successor, so that US President-elect Joe Biden would not be able to easily roll back on what China has described as an attempt to start a new Cold War.

Xiaomi bluntly denied the characterisation of its relationship with the government of China, saying it "provides products and services for civilian and commercial use" and "is not owned, controlled or affiliated with the Chinese military".

The listing is intended to prevent Americans from investing any money in Xiaomi, cutting off a vital flow of capital.

Huawei, the supplier of the second most used brand of cellphones in South Africa, appears on the same list. But it is a different set of sanctions that saw Huawei cut off from American technology – including Google services – last year. Xiaomi does not yet appear on that "entity list" maintained by the US Commerce Department, and which regulates contact between companies rather than capital markets.

Contrary to the US, where more expensive cellphones dominate, the lower-priced offerings from Chinese companies have proven increasingly popular in South Africa. Compared to a year ago, around 30% more Xiaomi devices were in use in South Africa in the first two weeks of January, with the Redmi Note 8 and Redmi Note 9S the most popular handsets.

Thanks to that growth by Xiaomi, and the massive following Huawei has developed, one in four South Africans now uses a handset from one of the companies. 

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