Chinese chip stocks tumble after US calls for new curbs on high-end tech

A worker at a chips factory in Chongqing, China, on March 30, 2022.

Future Publishing | Future Publishing | Getty Images

The US said it would grant a temporary license from Oct. 21 through to April next year to allow businesses to manufacture some of the high-tech products in China for use outside the country.

Chinese chip stocks tumble

China’s largest chipmaker, Semiconductor Manufacturing International Corporation, traded 3% lower Monday afternoon in Hong Kong, amid a broader market sell-off.

Hua Hong Semiconductor was down by about 9%, while Shanghai Fudan Microelectronics plunged by more than 20% as of Monday afternoon.

Shares of US chipmakers Nvidia and AMD tumbled in Friday’s trading session as worries about falling demand dragged down the sector.

“The US has been abusing export control measures to wantonly block and hobble Chinese enterprises,” Chinese Ministry of Foreign Affairs Spokesperson Mao Ning said at a briefing over the weekend, according to an official English-language transcript.

“Such practice runs counter to the principle of fair competition and international trade rules,” she said. “It will not only harm Chinese companies’ legitimate rights and interests, but also hurt the interests of US companies.”

Mao did not mention any plans for Chinese countermeasures.

The global semiconductor supply chain is highly specialized. Only a few companies have the most advanced technology, while China has been investing heavily in domestic players in an attempt to catch up.

Taiwan Semiconductor Manufacturing Company dominate the manufacturing capacity for the world’s most advanced semiconductors. Netherlands-based ASML is the world’s only company able to make the highly complex machines that are needed to produce the most advanced chips.

On the other hand, US companies such as Lam Research, KLA and Applied Materials are industry leaders for other tools needed to make chips.

Assessing the damage

It remains to be seen how damaging the new US restrictions will be on business.

The US government previously put Chinese companies Huawei and SMIC on a blacklist that requires suppliers to obtain a license before selling to them.

But suppliers to those two companies received licenses last year to do billions of dollars’ worth of business, according to Reuters.

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The US Bureau of Industry and Security estimated the latest rule changes mean it will receive at least an additional 1,600 new license applications a year.

International cooperation is also needed, a senior US government official said in a briefing Thursday, Reuters reported.

“We recognize that the unilateral controls we’re putting into place will lose effectiveness over time if other countries don’t join us,” the official said in the report. “And we risk harming US technology leadership if foreign competitors are not subject to similar controls.”

The US embassy in Beijing did not immediately respond to a CNBC request for comment on the report.

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A worker at a chips factory in Chongqing, China, on March 30, 2022. Future Publishing | Future Publishing | Getty Images The US said it would grant a temporary license from Oct. 21 through to April next year to allow businesses to manufacture some of the high-tech products in China for use outside the country.…

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