The US commerce department announced the move to block sales of American components to China’s Fuijan Jinhua Integrated Circuit Company Ltd. on Monday.
The agency noted Jinhua “poses a significant risk of becoming involved in activities that are contrary to the national security interests of the United States”.
The ban could bring the Chinese firm, which heavily relies on foreign technology, to a standstill.
It follows a similar ban against Chinese telecommunications equipment maker ZTE (ZTCOF) in April, which brought the firm to its knees.
Wilbur Ross, the US commerce secretary, commented on the ban saying: “When a foreign company engages in activity contrary to our national security interests, we will take strong action to protect our national security.
“The additional production, in light of the likely US-origin technology, threatens the long-term economic viability of US suppliers of these essential components of US military systems.
“Placing Jinhua on the Entity List will limit its ability to threaten the supply chain for essential components in our military systems.”
US chipmaker Micron Technology Inc. is currently in a dispute with Jinhua, which is one of its main competitors.
Micron has accused the Chinese firm of stealing its trade secret but Jinjua has firmly denied the claims.
Manish Bhatia, Micron executive vice president, claimed on Friday that Jinhua’s technology leaks were “definitely a concern”.
According to an economist at French investment firm Netixis, the US ban could trigger more actions related to high-end technology.
US firms have long been opposed to China’s drive towards building technology power stations to compete with the Silicon Valley.
Alicia Garcia Herrero, an economist at French investment firm Natixis told the Wall Street Journal: “What the US is doing now could spread to anything that is considered high-end technology that the US doesn’t want China to have any more.”
Referring to the ban placed on the Chinese telecommunications equipment maker ZTE, Ms Garcia Herrero added: “This case is very different from ZTE.”
The export restrictions on ZTE were lifted following a new settlement by the Trump’s administration.