Xiaomi plunges 10% as U.S. adds smartphone giant to investment blacklist
- The Trump administration has added smartphone maker Xiaomi (OTCPK:XIACY, OTCPK:XIACF) to a blacklist of alleged Chinese military companies, sending its Hong Kong-listed shares down 10.6% on Friday. The move means that Xiaomi is now subject to a November executive order restricting American investors from buying the company's shares or related securities.
- Statement from the DoD: "The Department is determined to highlight and counter the People's Republic of China's Military-Civil Fusion development strategy, which supports the modernization goals of the People’s Liberation Army 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."
- Response from Xiaomi: "The company reiterates that it provides products and services for civilian and commercial use. The company confirms that it is not owned, controlled or affiliated with the Chinese military, and is not a 'Communist Chinese Military Company' defined under the NDAA."
- Xiaomi's stock has more than doubled in the past 12 months and it has been rapidly gaining market share. In the third quarter of 2020, it surpassed Apple (NASDAQ:AAPL) to become the world's third-largest smartphone maker, according to Gartner and Counterpoint Research.
- Go deeper: Xiaomi has not been put on the Commerce Department's Entity List, which restricts companies from exporting U.S.-origin technology to firms without a license. That means Xiaomi will be able to continue using chips from Qualcomm (NASDAQ:QCOM) and the Android operating system (GOOG, GOOGL).
- Recent reports from the WSJ suggested that Alibaba (NYSE:BABA), Tencent (OTCPK:TCEHY) and Baidu (NASDAQ:BIDU) have been spared from the Defense Department's blacklist.