Xiaomi won a reprieve Friday when a US federal judge temporarily blocked a ban on investment in the company put in place by the Defense Department over alleged ties between the China-based phone maker and that country’s military.
The US’ “national security priorities are undoubtedly compelling government interests,” US District Judge Rudolph Contreras wrote in a memorandum accompanying his order to suspend the ban. “However, the court is somewhat skeptical that weighty national security interests are actually implicated here.”
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In January, during the last days of the Trump administration, the Defense Department officially added Xiaomi to its list of “Communist Chinese military companies,” meaning the phone maker was prohibited from receiving investments from US citizens or organizations and that existing investors would need to divest. Xiaomi later sued, demanding that it be removed from the list.
Xiaomi “reiterates that it provides products and services for civilian and commercial use [and] confirms that it is not owned, controlled or affiliated with the Chinese military, and is not a ‘Communist Chinese Military Company,'” a company spokesperson said at the time it was placed on the list.
The company didn’t immediately respond to a request for comment Saturday on Contreras’ ruling. But a spokesperson told Reuters that “Xiaomi plans to continue to request that the court declare the designation unlawful and to permanently remove the designation.” The Defense Department couldn’t be reached for comment Saturday.
Xiaomi, one of the biggest phone makers in the world, has said the Defense Department ban will cause “immediate” and “irreparable harm” by cutting off its access to US capital markets and limiting its ability for business expansion. The company rubs shoulders with Apple, Huawei and Samsung when it comes to smartphone market share, according to researcher IDC.
Huawei, too, has been a subject of US government concern about national security, landing on the Department of Commerce’s “Entity List,” which forbids US companies from trading with it. Huawei’s gear is used in telecommunications infrastructure, and alleged ties to China’s communist government have prompted worries about intelligence gathering. The company says those worries are unfounded.