China chip giant SMIC shares sink on US export controls

0 Comments

Shares in China’s biggest chipmaker tumbled Monday on reports that the United States had imposed export controls on the company, the latest salvo in the countries’ battle for technological dominance.

In a new blow for China’s advanced tech ambitions, the US Commerce Department reportedly ordered companies to seek permission before selling equipment to Semiconductor Manufacturing International┬áCorp (SMIC).

Equipment sold to the Chinese company posed an “unacceptable risk” of being diverted to “military end use”, according to a letter sent to major US computer chip firms that was seen by The Wall Street Journal and the Financial Times.

News of the letter, which was first reported Saturday, sent SMIC’s shares plunging in both Shanghai and Hong Kong on Monday, closing down seven and 3.9 percent respectively.

Asked about the new controls at a daily press conference Monday, Chinese foreign ministry spokesman Wang Wenbin said Beijing opposed Washington “abusing export controls and other restrictive measures to unreasonably suppress Chinese companies”.

Advanced tech has become one of the many battlefronts that have opened up in the past few years as relations between Beijing and Washington plummet to their lowest levels since diplomatic relations were restarted in 1979.

SMIC is China’s biggest contract manufacturer of chipsets and a key pillar of Beijing’s plans to achieve semiconductor self-reliance.

Analysts say China’s dependence on foreign — including US-made — chips hinders that national goal.

Backed by several state-owned entities, SMIC has made strides at improving China’s chip capabilities but it remains heavily reliant on imported equipment and software.

Under the new rules announced by the Commerce Department, US companies that want to sell equipment to SMIC will have to apply for a licence.

“The restriction, once implemented, will severely damage SMIC’s existing and future manufacturing capabilities, and customer trust,” Bernstein analysts led by Mark Li