What Did Illumina Do to Be Sanctioned by the Chinese Ministry of Commerce?

On February 4, China’s Ministry of Commerce released an announcement that shook the biopharmaceutical industry: the US gene sequencing giant Illumina, Inc. was officially included in the “Unreliable Entity List”.

The announcement was stern in tone: Illumina “violated the normal principles of market transactions by interrupting normal dealings with Chinese companies, taking discriminatory measures against them, and severely damaging their legitimate rights and interests. The Unreliable Entity List Mechanism will take appropriate measures against the aforementioned entity in accordance with relevant laws and regulations.”

A month later, the “appropriate measures” were implemented.

Illumina was banned from exporting gene sequencers to China, effective immediately.

Not only Illumina was affected; on the same day, the Ministry of Commerce also included 15 other American companies in the export control list, prohibiting the export of dual-use technologies to them. Ongoing related export activities must be stopped immediately.

A considerable proportion of the companies on the list had previously been included in the retaliatory list of the Chinese Ministry of Foreign Affairs. This statement by the Ministry of Commerce, which is directly responsible for the approval of imports and exports of dual-use items and technologies, undoubtedly indicates that the actual enforcement will be further intensified.

With successive announcements, China has clearly conveyed a message:

Yesterday’s reckless behavior will be paid for today.

For companies like Illumina, the consequences are immediate.

This loud thunder was not without warning. The seeds of Illumina’s bitter fruits were sown during strategic decisions made years ago. From a technology pioneer to a pawn in geopolitics, the rise and fall of this company is both a tragic song of corporate transformation and a microcosm of geopolitical struggles in the era of globalization.

In this war without smoke, are companies the self-assumed manipulators, or are they pawns at the mercy of others? The answer is harsher than we imagine.

How did American hard-tech companies, which once represented the spirit of innovation, gradually plunge themselves into the geopolitical whirlpool?

The transformation of Illumina from an industry pioneer to a metaphorical “weed killer” is a story of ambition, temptation, and the corruption of the American business environment.

Around the turn of the millennium, this San Diego-based startup reshaped genomics with its disruptive innovation in high-throughput sequencing technology, making DNA decoding efficient and cost-effective. Its equipment was in high demand by hospitals, universities, and pharmaceutical companies worldwide, making Illumina an unparalleled leader in the field.

Illumina changed the face of biomedicine, bringing substantial returns for its founding team. However, as the first-generation entrepreneurial geeks retired, the soul of Illumina quietly changed.

The entry of activist investor Carl Icahn and a group of professional managers with impressive resumes pushed the company from a technology-driven pioneer to the perilous path of capital operations.

Stock buybacks, mergers and acquisitions, and financial maneuvers gradually replaced pioneering exploration in the lab.

Illumina transformed from an innovator with dreams of changing the world into the very “800-pound gorilla” it once despised.

This transformation is not an isolated case. Under the dual drive of globalization and capitalization, many American tech companies have followed a similar path.

With the epic rise of BGI and its subsidiary MGI, the “easy money” environment that Illumina had long taken for granted began to change.

Facing increasing market competition, the new generation of Illumina’s managers chose not to engage in difficult, tedious work. Compared to investing in R&D and cost-controls, resorting to external tricks seemed much “smarter”.

The stage of competition thus shifted from laboratories, factories, and stores to courtrooms and private chambers.

In 2019, Illumina initiated multiple patent lawsuits against BGI, accusing them of intellectual property theft. BGI fought back, counter-suing Illumina for patent infringement.

In 2022, a U.S. Delaware court delivered a shocking verdict: Illumina was found to have infringed on MGI’s dual-color sequencing patent and was ordered to pay $334 million in damages. Ultimately, the parties reached a settlement, with MGI announcing an agreement to resolve all pending litigation in the U.S., and Illumina agreeing to pay $325 million in net compensation to MGI.

This defeat hit Illumina in multiple ways. Financially, while the $325 million compensation did not shake the company’s foundation, it cast doubt among investors about its growth prospects. Strategically, the failure of the patent battle failed to curb MGI’s expansion, leaving Illumina at a disadvantage in technical competition. Management, having swallowed the bitter pill, was later ousted from Illumina by activist investor Carl Icahn in a subsequent “palace coup”.

However, setbacks in the courtroom did not awaken Illumina’s controllers but drove them towards more dangerous political maneuvers.

Public records show that Illumina significantly increased its lobbying investments in the aftermath. After successfully inserting its own interests into the National Defense Authorization Act, Illumina decisively hired top lobbyists from the influential S-3 Group to lobby on issues related to national security and genomic security. Shortly thereafter, the United States Congress passed the BIOSECURE Act, severely limiting cooperation between American entities and companies like BGI.

Illumina’s long-lost “victory” ultimately proved to be nothing more than poisoning oneself with a short-lived sense of triumph.

Today, China’s Ministry of Commerce’s retaliatory measures arrived as expected. The import ban decision means not only that around 7% of the company’s revenue will disappear overnight but also brings instability to its supply chain and market confidence.

The deeper cost lies in the fact that Illumina’s short-sighted strategy has plunged it into the center of the geopolitical vortex. It once believed that politics was merely an extension and tool of capital, clearing obstacles that normal business rules could not overcome. However, the risks of dancing with wolves are far greater than they imagined.

Illumina’s encounter is not unique. Many of the 15 American companies targeted in this wave of retaliation by the Ministry of Commerce are also Silicon Valley startups, which on one hand heavily rely on Chinese supply chains while on the other hand spare no effort to align themselves with anti-China agendas in hopes of gaining favor from Silicon Valley’s right-wing patrons and the Washington military-industrial complex.

If Illumina represents the evolution of American tech companies around the millennium, at least its opening chapter was filled with passion, sincerity, and idealism. However, the current wave of retaliated Silicon Valley startups is already filled with lies and affectation from the very beginning of their stories.

How reliant are American hard-tech companies on the Chinese supply chain? Clone Robotics founder Dhanush Radhakrishnan recently provided a telling observation:

Packaging Chinese actuators and claiming them as self-developed is already a common practice for 99% of American robotics startups. These companies, at their inception, are often surrounded by temptations of capital and politics, choosing to “slide down” the easy path rather than striving upward in the right direction.

Illumina’s story, like a mirror, reflects the fragility and confusion of global companies in the geopolitical vortex. Reality coldly proves that in the clash of national interests, companies that consider themselves players are often the most fragile pawns. From patent battles to political manipulation to the ban on the Chinese market, each of Illumina’s choices leaves lessons in the eyes of history.

Illumina’s story will not be the final chapter. More arrogant pawns, thinking themselves clever, will continue to rise and fall on the chessboard. For those players still pursuing profit, the cost of forbidden fruit is only just beginning to manifest.

For today’s American manufacturing sector, China’s countermeasures are far from a trivial joke. Each ban and sanction is increasingly concrete and urgent reality for many Americans.

When today’s American companies gaze into the abyss where ideology and interests intertwine, its temptations and costs increasingly require sober scrutiny.

Will they continue chasing financial alchemy and lobbying magic, or will they return to the essence of technology and the market?

The storm has not ended, the shadows remain, and the answer will perhaps only emerge in the tempering of time, whispered between closed factories and silent laboratories.

Editor: Zhongxiaowen