Semiconductor Manufacturing International Corporation (SMIC), the leading semiconductor manufacturer in China, is facing increased scrutiny as reports surface regarding a possible change in leadership and potential restrictions from the United States, causing concern among investors.

According to reports from Reuters and The Wall Street Journal on Friday, the U.S. Commerce Department is considering adding numerous companies – primarily Chinese, and including the partially state-owned SMIC – to its export control list. This action would limit SMIC’s ability to procure essential components from U.S.-based companies, requiring American exporters to obtain licenses for sales to the Chinese firm.

The Commerce Department has confirmed that its Bureau of Industry and Security has placed SMIC on the Entity List in order to safeguard U.S. national security interests. Along with SMIC, sixty other organizations, including China’s prominent drone manufacturer DJI, have been added to the list due to activities considered detrimental to U.S. national security or foreign policy objectives.

A statement from the agency explained that this decision is based on China’s strategy of military-civil fusion and evidence linking SMIC to entities within the Chinese military industrial base.

The provision of components utilized in the production of advanced semiconductors – those at the 10-nanometer level or smaller – will be “presumed to be denied” to prevent this critical technology from bolstering China’s military-civil fusion initiatives.

Reports indicated last month that the U.S. government had also added SMIC to a defense blacklist, which would prohibit U.S. investors from purchasing the company’s securities.

SMIC has not yet responded to requests for comment.

These developments coincide with a restructuring of SMIC’s management and what appears to be internal disagreements within the company. SMIC recently named Chiang Shang-Yi, previously a co-chief operating officer at Taiwan Semiconductor Manufacturing Co (TSMC), as its vice-chairman. Shortly after, a purported resignation letter from Liang Mong Song began circulating online, in which the SMIC co-chief executive stated he was not informed about Chiang’s appointment and that the hiring led to his decision to resign.

SMIC subsequently released a statement indicating it is “verifying” the executive’s stated intention to resign, which resulted in a decline in the company’s stock price.

The future of SMIC and TSMC is closely connected to the situation surrounding Huawei. TSMC, formerly a key supplier to the telecommunications equipment and smartphone manufacturer, reportedly ceased taking orders from the Chinese company following the implementation of new U.S. export controls. There was speculation that SMIC could potentially replace TSMC as a supplier for Huawei, however, industry analysts have consistently maintained that the Chinese chipmaker lags behind its Taiwanese competitor in the production of cutting-edge chipsets for mobile phones.

Huawei has experienced difficulties with phone production since the Trump administration added it to the Entity List and disrupted its chip supply chain.

This article was updated on December 18, 2020 to include statements from the U.S. Department of Commerce.