U.S. may block China’s biggest chip maker SMIC from using United States technology

Thursday, 10 Sep, 2020

Shares of China's largest silicon chip maker, Semiconductor Manufacturing International Corporation (SMIC), plummeted on Monday after Reuters reported that the United States plans to blacklist the company.

United States regulators are considering adding Semiconductor Manufacturing International Corp. The Chinese Embassy in Washington did not respond to requests for comment.

Shares of SMIC plunged over 23% Monday, closing at 18.24 Hong Kong dollars. The recently listed Shanghai shares decline by 11.29% to close at 58.80 Chinese Yuan.

Despite steady government support since its founding in 2000, SMIC lags behind its rival both in terms of production volume and technology.

China has lashed out at the USA government over potential export restrictions on SMIC, the country's biggest chipmaker. The company subsequently said it is "incomplete shock and perplexity to the news", adding that it has no relationship with the Chinese military.

"In the short term, President Trump's strategy could cause more pain to USA firms than any companies in China".

The result of SMIC being blacklisted will not only be devastating for the company but also for its US-based suppliers.

China's foreign ministry called US sanctions "wanton oppression" on Monday as it said that the White House was "blatantly bullying" businesses based in China.

The latest measures could block Huawei from accessing chipsets, dealing a further blow to the Shenzhen-based tech giant after passing further restrictions on semiconductor technologies in August and extending the Entity List in May a second year. The restrictions have muzzled Huawei's once-promising chip division and is squeezing its overseas phone sales.

"SMIC would be unable to update the software of any of its USA machines or have personnel from suppliers helping it to get them working", Richard Windsor, founder of research firm Radio Free Mobile, told the BBC.

In 2018, the Trump administration prevented Dutch machinery maker ASML ASML.AS from shipping to China a $150 million chip-lithography machine that is needed to manufacture advanced microprocessors. This development contributes to ongoing escalation across the global tech industry, as the policy stands to bar the Chinese firm from using and testing chips with U.S. semiconductor tools.

SMIC products are exclusively for civilian and commercial end-users and end-uses. Via its secondary listing in Shanghai, SMIC had raised £5.01 billion in July.