In its latest action to restrict China companies, the U.S. administration is reportedly considering imposing new export restrictions on chips produced by Semiconductor Manufacturing International Corporation (SMIC) - China's largest semiconductor manufacturer.

According to the U.S. Defense Department the proposal is being discussed by top U.S. officials.

A department representative confirmed the proposal to add SMIC to the Commerce Department's Entity List was being discussed and, if approved, the company would essentially be cut off from its U.S.-based suppliers. It will join 300 other China-based companies such as Huawei Technologies, ZTE and HikVision on the U.S. trade blacklist.

The representative said the agency was working with other agencies to review all of the available information and determine if SMIC needed to be added to the Entity List. If added all exports to the China company from the U.S. must go through strict scrutiny.

In response SMIC said in a statement over the weekend it was in "complete shock." The company added it was perplexed by the action and said its products were for civilian and commercial users only. SMIC said it didn't have any relationship with China's military and all the accusations made against it were false.

The proposal is the latest action by the Trump Administration in the country's trade dispute with China. It has to date spread into the technology sector resulting in tit-for-tat measures that have disrupted business transactions for companies from both countries. The U.S. claims all of its actions against China technology companies were made to protect U.S. national security.

U.S. officials have repeatedly alleged China's technology companies were mostly being used by the China government to spy on other countries and to undermine established industries. The companies on the U.S. trade blacklist and others have denied the accusations. China's Communist Party has said it doesn't engage in industrial espionage. China companies such as Huawei have said they were not nor ever had been controlled by the China government.