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Illumina Could Face Sanctions After Being Put on China's 'Unreliable Entities' List

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This article has been updated with a comment from Illumina.

NEW YORK – The Chinese Ministry of Commerce said on Monday evening that it has put Illumina on a list of so-called "unreliable entities," along with American clothing company PVH, subjecting it to a series of trade sanctions from China.

The move comes shortly after the Trump administration announced 10 percent tariffs on all Chinese exports to the US.

In its announcement, the Chinese ministry claimed that the two US companies "violated normal market transaction principles, interrupted normal transactions with Chinese companies, took discriminatory measures against Chinese companies, and seriously damaged the legitimate rights and interests of Chinese companies."

In a separate statement, the ministry said putting PVH and Illumina on the list serves to "protect China's national sovereignty, security, and development interests."

The ministry said China has always handled the list "prudently" and only targets "a very small number" of foreign entities that endanger its national security.

First issued as an executive order by China's Ministry of Commerce in 2020, the unreliable entities list targets foreign entities, companies, organizations, and individuals that are found to "jeopardize Chinese national interests and security" as well as to engage in unfair business practices with Chinese companies.

According to the executive order, entities on the list may face one or more sanctions including restricted or prohibited import and export activities; restricted or prohibited investment in China; restricted or prohibited entry into China of relevant personnel; restricted or canceled work permits, visa, or residency permits for relevant personnel; and potential fines.

The executive order also stipulates that the sanctioned parties can be removed from the list by the government, depending on the circumstances. If a Chinese company, organization, or individual needs to conduct business transactions with sanctioned foreign entities on special occasions, for example, they may submit an application to the government.

It is unclear what exact sanctions Illumina may face in China. "Wherever Illumina operates, we comply with all laws and regulations," a company spokesperson said in an email. "We are assessing this announcement with the goal of finding a positive resolution."

Illumina's inclusion in China's list further escalates tensions between the US and China that are affecting the genomics industry.

Last year, the US House of Representatives Select Committee on Strategic Competition between the US and the Chinese Communist Party (CCP) introduced the Biosecure Act, which identified BGI Group, its affiliate MGI Tech, and MGI's US subsidiary Complete Genomics, along with WuXi AppTec and WuXi Biologics, as so-called "foreign adversary biotech companies of US national security concern," aiming to cut off federal funding for their services and products.

The House eventually passed the Biosecure Act with bipartisan support last September, but the corresponding bill was not passed in the Senate so far.

Illumina has lobbied the US Congress on the proposed legislation, which targets its Chinese competitor for sequencing technology.

In addition, in 2022, the US Department of Defense had added BGI Genomics and 12 other companies to a list of "Chinese military companies operating directly or indirectly in the United States." That move came with an executive order from President Biden, banning US entities from purchasing or selling publicly traded securities of these companies.

Sanctions Illumina may face from the Chinese government's latest move could have a "significant" impact on the company's 2025 growth and may result in a guidance reset, depending on what management's underlying assumption for the region were, Luke Sergott, an analyst from Barclays, wrote in a note to investors on Tuesday.

According to Sergott, Illumina's sales in China have been in decline since 2021, with peak sales of $500 million going down to roughly $300 million in 2024, "mainly due to local competition." If sales were to go down to $0 in 2025, this would represent a 7 percent decline in growth for the year, he noted.

Vijay Kumar, an analyst for Evercore ISI, remarked in a note to investors on Tuesday that China represents about 7 percent of Illumina's revenues but has been a "drag to overall growth" for the last two years.

In morning trading on the Nasdaq, Illumina's shares were down about 5 percent at $124.98.