US’s toughest chip export ban on China could account for up to 30% of some global chip giants’ revenue

On Saturday, workers manufacture chips at Anhui Dongke Semiconductor Co in east China’s Anhui Province. The company is located in Anhui Ma’anshan Economic and Technological Development Zone, and is mainly engaged in the design, production and sale of green energy chips. Photo: CGV

The US government on Friday issued a wide range of technology export controls, including what would be the “toughest” ban on the shipment of certain semiconductor chips made anywhere in the world with equipment. Americans to China, further intensifying its so-called tech decoupling push. and threatening to wreak havoc on the highly globalized chip supply chain.

While the series of measures is widely considered the biggest shift in US policy on shipping technology to China since the 1990s, Chinese market watchers and industry insiders said the move further demonstrated that the United States’ multi-year crackdown on China’s tech sector has failed to achieve its goal of strangling China’s tech rise.

Moreover, the move, while aiming to further cut China off from foreign chips, will hurt multinationals around the world, including chip giants in the United States, which have benefited greatly from China’s vast market, experts noted, warning that the disruptions posed by the United States could stall the development of the global chip industry for years.

Overall damage

Commenting on the US decision, Mao Ning, spokesman for China’s Foreign Ministry, said on Saturday that new US export controls would hamper international technology exchanges and economic cooperation, and undermine stability. global industrial and supply chains and the recovery of the global economy.

The United States’ politicization and militarization of technological, economic and trade issues will not stop China’s development, but will only harm the United States itself, the spokesperson added.

The export control measures taken by the United States on Friday, if effective, could hamper the Chinese chipmaking industry by forcing American and foreign companies that use American technology to cut support for some of the main Chinese chip factories and designers, according to Reuters.

Also on Friday, the United States added China’s top memory chip maker YMTC and 30 other Chinese entities to a so-called “unverified” trade list.

Since the Trump administration, the United States has never backed down from a crackdown on China’s chip industry, but the escalating crackdown shows the previous crackdown hasn’t worked, Ma said on Saturday. Jihua, a veteran telecommunications industry analyst, told the Global Times.

The Biden administration is well aware that the marginal effect of the chip crackdown is diminishing, but it has no better options, Ma added.

“It is extremely difficult for the Biden administration to cut the global chip industry and supply chains and shut out China with just a handful of policies,” Fu Liang, an independent technology analyst, told the Global Times on Saturday. .

He said the reckless move by the United States will hurt the interests of many countries involved and could end up weakening its own leading position in the international technology market and excluding itself from global industrial and supply chains.

“Out of concern for their own interests, tech companies around the world may not follow U.S. policies thoroughly,” Fu said, noting that foreign vendors fear U.S. chip export restrictions will directly reduce their profits. of the biggest consumer of chips in the world. and that the rapid replacement of China in the domestic market will mean that there will be no more orders for them.

An example cited by market watchers is the change in attitude of US allies towards the so-called Chip 4 alliance. While major chip producers like South Korea and Japan initially showed a cooperative attitude to the regard to this decision, they slowly moved towards caution. There were no major updates on the alliance other than a few meetings.

“The resistance is intensifying and their will is diminishing,” Ma said.

As the Biden administration steps up its tech decoupling push, more U.S. and global companies will see their losses mount. For example, after the US government banned US semiconductor company Nvidia from selling sophisticated chips to China at the end of August, the company estimated it could lose around $400 million. of potential sales to China in the third quarter and actively engaged with the US government. in seeking exemptions.

If the new measures are strictly implemented, it could jeopardize up to 30% of the total revenue of some US and global chip industry giants, as China’s revenue accounts for a third of their total revenue, Han Xiaomin, managing director of Jiwei Insights in Beijing, told the Global Times on Saturday.

Global chip companies are already beginning to consider ways to weather the impact of new US export controls.

“SK Hynix is ​​ready to do its best to obtain a license from the US government and will work closely with the South Korean government to this end,” the company said in a statement sent to the Global Times on Saturday. “We are also ready to operate our manufacturing plants in China smoothly, subject to compliance with international rules.”

The US decision will also cause the most damage to its own R&D. “As it costs huge investments of financial and human resources in advanced chip R&D, U.S. companies are unlikely to see much return without chip exports to China and could barely reinvest in future R&D,” he said. said Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing.

The Semiconductor Industry Association, which represents 99% of the U.S. semiconductor industry by revenue and nearly two-thirds of non-U.S. chip companies, on Friday urged the U.S. government to implement the rules of purposefully – and in collaboration with international partners – to help level the playing field and mitigate unintended damage to American innovation.

“That won’t stop China”

As for China, the latest US measures are unlikely to have any significant additional impact on the Chinese chip industry, which has withstood the years-long campaign of US repression and has in fact experienced a great development in recent years, experts noted.

Several major semiconductor companies in China, including major component producers and suppliers, posted strong results in the first half of 2022, despite the relentless US crackdown on China’s chip industry.

One such winner is China’s largest chipmaker, Semiconductor Manufacturing International Corp (SMIC), which reported better-than-expected revenue of $1.903 billion in the second quarter of this year, up from 3.3% compared to the previous quarter and 41.6% in one year. over-year. Bloomberg also reported in July that SMIC had started shipping 7nm chips.

The Chinese government is also giving full play to the advantages of China’s socialist system, which allows the nation to focus its strength and efforts on important things in the country’s chip industry.

“The chip industry is expected to see a breakthrough in one or two years,” Ma said.

Gao Shiwang, director of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, said the latest U.S. restriction could only slow, not strangle, China’s tech rise.

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