US-China Tensions Aggravate: Chinese Chipmakers Bleed As US Sharpens Its Knives

Shares in top Chinese chipmakers shed $7.7 billion in market value on October 10, as new U.S export controls restricted the sale of semiconductors made with U.S. technology unless vendors obtain an export license.

The controls also barred U.S. citizens or entities from working with Chinese chipmakers without explicit approval and limited the export of manufacturing tools that would allow China to develop its equipment, the Financial Times reports.

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The U.S. commerce department had added 31 companies to its “unverified list” to make it more difficult for Chinese companies to manufacture or obtain advanced computer chips vital to cutting-edge technologies.

The chipmakers included China’s largest chipmaker Semiconductor Manufacturing International Corp, Hua Hong Semiconductor Ltd HHUSF, Shanghai Fudan Microelectronics Co Ltd SFDMF, Naura Technology, ACM Research, Inc ACMR and Advanced Micro-Fabrication Equipment.

A Hong Kong analyst acknowledged that the restrictions affected overall sentiment in the market and are not likely to ease up. The restrictions had already sent the Philadelphia Stock Exchange Semiconductor index down as analysts warned against Chinese chip producers taking a substantial hit from the new limits.

Traders said the restrictions would likely hit big suppliers across the rest of the Asia-Pacific region.

Taiwan also expressed solidarity with U.S.’s restrictions on China, Reuters reports. Taiwan, a major chip producer, is home to leading contract chipmaker Taiwan Semiconductor Manufacturing Company Ltd TSM and a major supplier to companies including Apple Inc AAPL.

Taiwan has its own concerns about China, especially efforts by Chinese companies to poach chip talent and technical know-how. The government tightly restricts Taiwanese chip investment in China, the island’s largest trading partner.

Taiwan’s worries have gained pace as China mounts regular military drills near the island.

China had opposed the U.S. Chips Act and assured aggressive measures to safeguard its legitimate rights when necessary. Some provisions in the U.S. act restricted normal economic, trade, and investment activities of relevant firms in China, the country alleged.

Top U.S. lawmakers had urged the Biden administration to blacklist Chinese semiconductor company Yangtze Memory Technologies Co for allegedly violating export controls by supplying Huawei Technologies Co, Ltd.

Photo by mohamed hassan via Pxhere