Chinese chip stocks fall after US calls for new restrictions on advanced technology

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

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

Chinese chip stocks fall

China’s largest chip maker, Semiconductor Manufacturing International Corporationtraded 3% lower on Monday afternoon in Hong Kong, amid a broader selloff in the market.

Hua Hong Semiconductor fell by about 9%, while Shanghai Fudan Microelectronics down more than 20% Monday afternoon.

Stocks in US chip makers Nvidia and AMD fell in Friday’s trading session as worries about falling demand dragged down the sector.

“The United States has abused export control measures to deliberately block and hamper Chinese companies,” Chinese Foreign Ministry spokesman Mao Ning said at a briefing over the weekend, according to an official English-language transcript.

“Such practices are contrary to the principle of fair competition and international trade rules,” she said. “It will not only harm the legitimate rights and interests of Chinese enterprises, but also harm the interests of American enterprises.”

Mao did not mention any plans for Chinese countermeasures.

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

Taiwan Semiconductor Manufacturing Company dominates the production capacity of the world’s most advanced semiconductors. Netherlands-based ASML is the world’s only company able to make the very complex machines needed to produce the most advanced chips.

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

Assessment of the damage

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

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

But suppliers to these 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 that recent rule changes mean it will receive at least another 1,600 new license applications per year.

International cooperation is also needed, a senior US official said in a briefing on Thursday. This was reported by Reuters.

“We recognize that the unilateral controls we impose will lose effectiveness over time if other countries do not join us,” the official said in the report. “And we risk damaging American technology leadership if foreign competitors are not subject to similar scrutiny.”

The U.S. Embassy in Beijing did not immediately respond to a CNBC request for comment on the report.

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