The development comes midst allegations that Fujian Jinhua Integrated Circuit Co Ltd stole intellectual property from U.S. chip company Micron Technology Inc.

In a strategic development, U.S. President Donald Trump’s administration has placed Chinese state-backed chipmaker Fujian Jinhua Integrated Circuit Co Ltd on a list of entities that cannot purchase components, software and technology goods from U.S. firms.

The development comes midst allegations that Fujian Jinhua Integrated Circuit stole intellectual property from U.S. semiconductor company Micron Technology Inc.

The Trump Administration is concerned that the Chinese semi conductor firm could flood the market with cheap chips that are also manufactured by U.S. companies that supply them to the U.S. military. If the U.S. chipmakers go out of business, the military would lose a supplier for an item that must come from the United States.

According to trade experts, the Trump administration’s move may be an unprecedented effort to use a legal tool known for punishing foreign companies that send U.S.-origin goods to sanctioned countries such as Iran to instead protect the economic viability of a U.S. firm.

The move essentially is an escalation of what was until now a business dispute. As per a spokesman from the Commerce Department, the move was “based on the regulatory standard.”

“When a foreign company engages in activity contrary to our national security interests, we will take strong action to protect our national security,” said U.S. Commerce Secretary Wilbur Ross in a statement.

A Commerce Department spokesman said the agency would review any appeal by Fujian Jinhua.

The U.S. move is similar to the one it used on ZTE Corp, a Chinese telecommunications equipment company which almost went out of business earlier this year after the Trump Administration cut off its U.S. suppliers.

As per Linley Gwennap, a chip expert and president of the Linley Group, Fujian Jinhua was a relatively new company building DRAM as part of China’s strategic effort and plans on becoming self-sufficient at manufacturing chips.

Suppliers such as Lam Research Corp, Applied Materials Inc, and KLA-Tencor Corp were likely supplying equipment to Fujian Jinhua.

“It’s pretty much impossible to build a leading-edge fab (semiconductor plant) without buying equipment from these American companies,” said Gwennap.