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One of the last acts of the Trump administration in mid-January was to declare Chinese smartphone maker Xiaomi a “Chinese communist military company”. The Department of Defense decision (which is different from the Department of Commerce’s export ban against Huawei) prohibits US citizens from holding Xiaomi shares or other investments as of March 15, 2021. This weekend, Xiaomi published a response to the decision, which came in the form of legal complaints to the US Department of Defense and Treasury.
Xiaomi’s complaint is now directed at the new defense and treasury secretaries appointed by Biden, saying the decision was “factually incorrect and deprived the company of due process”. Xiaomi calls the decision “illegal and unconstitutional”, denies being controlled by the Chinese military and would like to see the decision reversed.
As Reuters reports, Xiaomi says that a “substantial number” of its investors are US citizens – including three of the ten largest shareholders of common shares – and that the decision would cause “immediate and irreparable damage to Xiaomi.” The company continues, “In addition, Xiaomi’s public association with the Chinese military will significantly damage the company’s position with business partners and consumers, causing reputational damage that cannot be readily quantified or easily repaired.”
Xiaomi had an IPO in 2018 and today is one of the most valuable smartphone companies in the world, with a market value of $ 96 billion. Until that decision, Xiaomi had been a big winner in the government’s war against Huawei, gaining market share that was reduced by Huawei after the stifling export ban. Worldwide, IDC places Xiaomi in third position in the smartphone market, behind Samsung and Huawei and ahead of Apple.