US squeezes China’s biggest chip-maker SMIC

US squeezes China's biggest chip-maker SMIC

By Leo Kelion
Expertise desk editor

picture copyrightSMIC/Getty Photographs

The US Division of Commerce has written to American suppliers of China’s largest chip producer, warning them of “unprecedented dangers” that their merchandise could possibly be utilized by the Chinese language navy.

The letter reminds the corporations they have to apply for licences to ship managed gadgets to Shanghai-based SMIC.

However it doesn’t seem that Washington has determined whether or not or to not add the agency to a commerce blacklist.

SMIC has denied any navy hyperlinks.

And it mentioned it had not acquired any formal discover of latest restrictions from the US.

However the newest motion triggered Semiconductor Manufacturing Worldwide Company’s shares to drop about 7% in Hong Kong commerce.

The autumn adopted a steeper decline earlier this month when the Pentagon first revealed it had proposed more durable restrictions towards the enterprise, together with including it to the federal government’s Entity Listing.

That will forestall any firm promoting items or providers to SMIC that concerned US mental property with out first getting particular permission.

Such a step has already been taken towards SMIC’s largest shopper – Huawei – which has triggered main disruption to the telecoms kit-maker’s enterprise.

Chinese language state media had beforehand reported that SMIC was amongst many firms that had

requested a US licence to continue supplying Huawei.

However one trade analyst prompt the most recent transfer indicated the US was more and more targeted on SMIC itself.

“Denial of US semiconductor manufacturing tools would put SMIC at a extreme drawback, as a result of most of that know-how comes from American sources,” defined Jim Tully.

“China may goal to change into self-sufficient in these applied sciences over the long run, but it surely appears to me that it could take 10-plus years to take action.

“And within the quick time period, the tools and associated software program SMIC already makes use of nonetheless wants ongoing assist and upkeep from its producers.”

This has led to hypothesis that SMIC’s survival could now be at stake.

Blocked sale

SMIC was based in 2000, and has since change into essentially the most distinguished chip-making foundry in mainland China.

Till lately, it was considered as being a beneficiary of rising US-China stress as a result of it was anticipated to profit from Beijing’s drive to make the nation’s tech sector self-sufficient.

The agency has raised near $10bn (ÂŁ7.7bn) this 12 months through a share sale and different means to broaden its operations.

Along with Huawei, SMIC’s purchasers embody lesser-known Chinese language chip designers together with Gigadevice and Unisoc, in addition to worldwide firms together with Qualcomm and Broadcom.

Nonetheless, its most superior merchandise are mentioned to lag two generations behind what rival producers – together with Taiwan Semiconductor Manufacturing Firm (TSMC) and South Korea’s Samsung – are able to, as a result of SMIC can’t at the moment make transistors as small as they will. This implies its merchandise should not appropriate to be the state-of-the-art processors within the newest smartphones or different superior devices.

The explanation for that is partly as a consequence of current restrictions Washington has imposed on the agency.

At current, the one solution to take advantage of superior logic chips is to make use of tools made by a Dutch firm, ASML.

picture copyrightGetty Photographs
picture captionASML is the biggest provider of lithography semiconductor manufacturing machines
SMIC ordered a $150m lithography machine – which makes use of lasers targeted by big mirrors to print miniscule patterns on silicon – from ASML in 2018. However Reuters reported the White House convinced the Dutch government to block the export on safety grounds.

A spokesman for ASML declined to remark when requested by the BBC whether or not the deal was nonetheless in limbo.

Including SMIC to the US Entity Listing would forestall the Chinese language agency sourcing {hardware}, software program and chemical supplies from different suppliers.

For now, the corporate is hoping to keep away from that final result by clearly denying it provides merchandise to the Folks’s Liberation Military.

“Any assumption of the corporate’s ties with the Chinese language navy are unfaithful statements and false accusations,” it has mentioned.

However this has been referred to as into query by others.

One Chinese language state-owned newspaper has claimed the case illustrates the need for a “new long march” with a view to “management all analysis and manufacturing chains of the semiconductor trade”.
Bloomberg has reported that Beijing plans to unveil new policies to support the sector in October.

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