SMIC rejected the alleged defense connection in a statement. It insisted that it offers chips and services “solely” for civilian uses, and that it had “no relationship with the Chinese military.” SOS has defended the report and argued that SMIC was “deeply embedded” in military projects.

The military links haven’t been firmly established, and there’s no guarantee the discussions will lead to a ban.

If the US did add SMIC to the blacklist, though, it could dramatically escalate an already tense trade war. As there are sometimes few or no alternatives to American parts, it could face severe difficulties growing or maintaining its factories. That, in turn, could hamper customers that include Huawei and other Chinese tech giants. China might expand its retaliation and hurt US companies that depend on Chinese manufacturing and parts for their products. The feud could get very ugly, very quickly.