But there's also some good news: unlike Huawei being added to the US Entity List, Xiaomi can still do business with American companies. The Company reiterates that it provides products and services for civilian and commercial use. The administration believes that Xiaomi is linked to the Chinese military.
Stats for the third quarter of a year ago put Xiaomi as not only the third biggest Android smartphone maker in the world, but also the third biggest smartphone maker overall - even ahead of Apple. In addition to Xiaomi, the list also includes Comac, a plane maker that planned on setting up a factory in the U.S.to compete against Boeing and Airbus.
In a statement, the US Department of Defence (DoD) said it had nine additional "Communist Chinese military companies" operating directly or indirectly in the US, including Xiaomi.
China condemned Washington's move on Friday.
The company said it is "not owned, controlled or affiliated with the Chinese military", and said it would act to protect its interests. However, it does mean that U.S. investors only have until November 11 this year to divest any holdings they have in Xiaomi, which now counts as the third-largest smartphone manufacturer. Xiaomi says it's now reviewing the potential consequences of the DoD designation before taking action.
Xiaomi's market share has grown as Huawei's sales have suffered after it was blacklisted by the United States and its smartphones were cut off from essential services from Google.
This impacted crucial parts such as OLED screens and chips that powered Huawei devices.
The US and China have been engaged in a trade war since 2018 that has seen each country target the other's exports with tariffs, while the US has targeted a broad range of high-profile Chinese companies, including prominent tech firms such as Huawei and fellow telecoms equipment maker ZTE.
Richard said this would help remove the dependancy smartphone manufacturers have on Google.