SMIC stock plunges as US calls for further sanctions of China’s top chipmaker over Huawei smartphone

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Shares in SMIC, China’s largest contract chipmaker, plunged on Thursday, after two US congressmen referred to as on the White Home to additional limit export gross sales to the corporate.

The feedback got here after Huawei Applied sciences launched the Mate 60 Professional, a Chinese language smartphone powered by a complicated chip that’s believed to have been made by SMIC.

Final week’s launch shocked business specialists who didn’t perceive how SMIC, which is headquartered in Shanghai, would have the power to fabricate such a chip following sweeping efforts by america to limit China’s entry to overseas chip expertise.

TechInsights, a analysis group based mostly in Canada specializing in semiconductors, revealed shortly after the launch that the smartphone contained a brand new 5G Kirin 9000s processor developed particularly for Huawei by SMIC.

This can be a “massive tech breakthrough for China,” Jefferies analysts mentioned Tuesday in a analysis notice.

The event has fueled fears amongst analysts that the US-China tech battle is prone to speed up within the close to future.

The Semiconductor Manufacturing International Corp. (SMIC) headquarters in Shanghai, China, on Tuesday, March 23, 2021.

US consultant Mike Gallagher, chair of the US Home of Representatives committee on China, referred to as on the US Commerce Division on Wednesday to finish all expertise exports to Huawei and SMIC, in line with Reuters.

Gallagher was quoted as saying SMIC could have violated US sanctions, as this chip possible couldn’t be produced with out US expertise.

“The time has come to finish all US expertise exports to each Huawei and SMIC to clarify any agency that flouts US regulation and undermines our nationwide safety can be lower off from our expertise,” he mentioned.

Shares in SMIC, which stands for Semiconductor Manufacturing Worldwide Company, sank 6.3% in Shanghai and 5.1% in Hong Kong on Thursday. Hua Hong Semiconductor, China’s second largest chip foundry, tumbled 4.8%.

Texas Republican Michael McCaul, who chairs the Home International Affairs Committee, was quoted by Reuters as saying he was involved about the potential for China attempting to “get a monopoly” within the manufacture of less-advanced pc chips.

“We talked rather a lot about superior semiconductor chips, however we additionally want take a look at legacy,” he reportedly mentioned, referring to older pc chip expertise which doesn’t fall beneath export controls.

“I believe China is attempting to get a monopoly available on the market share of legacy semiconductor chips as effectively. And I believe that’s part of the dialogue we’ll be having,” he mentioned.

Chinese language state media have touted the event as an indication the nation had efficiently “damaged US sanctions” and “achieved technological independence” in superior chipmaking.

Meme makers on the Chinese language web have even topped US Commerce Secretary Gina Raimondo the unofficial model ambassador for the Mate 60 sequence.

The memes poke enjoyable at the concept that that US sanctions, that are applied and enforced by the US Commerce division, could have not directly led to the launch of the brand new cellphone as China’s homegrown corporations needed to work with the accessible expertise.

Raimondo visited China final week, when the cellphone was launched. The memes have gone viral on-line and been reported on by state broadcaster CCTV.

Earlier than Thursday, SMIC’s shares in Hong Kong had rallied greater than 20% inside two weeks as a consequence of investor optimism. Huahong Semiconductor jumped 11%.

CNN has reached out to Gallagher’s and McCaul’s places of work for remark, however has but to obtain a response.

Huawei was added to a blacklist in Could 2019 by the US Commerce Division over nationwide safety considerations. Which means firms have to use for US export licenses to produce expertise to Huawei.

SMIC was additionally placed on the identical checklist in 2020, as US officers have been involved it may use American expertise to assist the Chinese language army. SMIC has denied having any relationship with the Chinese language army.

“The truth that China has achieved an enormous breakthrough in [semiconductor] tech will possible create extra debate within the US concerning the effectiveness of sanctions,” mentioned the Jefferies analysts.

They anticipate the Biden administration to tighten chips ban on China, which was launched in October 2022, within the subsequent few months, additional limiting China’s entry to superior US semiconductors.

“General the US-China tech battle is prone to escalate,” they mentioned.

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