China’s biggest server maker, Inspur, said Friday that Intel has resumed shipments to it. The American chipmaker briefly suspended shipment after Inspur was added to a US list of Chinese companies it deems military-controlled.

Why it matters: The list, announced by the US Department of Defense, paves the way for US President Donald Trump to impose sanctions on 20 Chinese companies, including Inspur and Chinese telecommunications equipment maker Huawei. However, Intel’s twist indicates the list has not been turned into an export control list.

  • Inspur has around 37.6% of China’s server market in the first quarter of this year, according to market research firm Gartner (in Chinese). The company is an important provider of hardware used by many of China’s leading cloud-computing firms like Aliyun and Tencent Cloud.
  • Inspur spent some RMB 17.9 billion (around $2.5 billion) on sourcing components from Intel in 2019, accounting for 37.5% of its total expenses, according to its 2019 annual report (in Chinese).

Details: Inspur has received notice from Intel that the US company has resumed shipment to the Chinese server maker, Chinese media Caixin reported Friday. Intel also confirmed the information to Caixin.

  • Intel said Wednesday it had suspended shipments to Inspur because it needed to “adjust its supply chain to comply with relative US laws,” Caixin has reported.
  • Shares of the company, where are listed on the Shenzhen Stock Exchange, surged 4% Friday morning on the news.
  • The interruption to shipments came after the Pentagon compiled a list of 20 Chinese companies with ties to the Chinese military last month. President Trump can use the International Emergency Economic Powers Act’s authorities against entities on the list, Axios reports, citing Larry Wortzel, a commissioner of the US-China Economic and Security Review Commission.

Context: Chinese manufacturing companies are increasingly subject to supply chain disruption when sanctioned by the US as a result of intensifying geopolitical conflicts between the world’s two largest economies.

  • In 2018, ZTE, a smaller rival of Huawei, saw its market value tank by billions of dollars after the US banned American companies from exporting components and technology to it for seven years. The ban was later lifted in July 2018.
  • In May 2019, the US imposed similar sanctions against Huawei. The company expected the ban could reduce its production output by $30 billion over 2019 and 2020.

Writing about semiconductors and telecommunications.