China’s biggest chip company in the same fate as Huawei?

The Washington administration dealt a fatal blow to China’s largest chipmaker after placing it on a list of banned access to US technology supplies.

On December 18, CNN news SMIC China’s leading chip manufacturer – was blacklisted by the US Commerce Department. Chinese businesses on the list are prohibited from accessing supplies of American goods and technology.

Observers said the blow of the US President Donald Trump administration will cause many serious problems for SMIC. The company depends on US sourcing of software, machinery and other equipment for the design and manufacture of semiconductors.

Last month, SMIC warned investors that US export restrictions could become a major concern in the future. Before SMIC, Chinese technology giant Huawei was also included in this list. Immediately, the global business of the world’s second-largest smartphone maker paralyzed.

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After the list of the US Department of Defense, SMIC continues to be listed by the US Department of Commerce to block the US technology supply with Chinese enterprises. Photo: Reuters.

This could be a fatal blow to China’s largest chip maker. SMIC’s management is also facing many problems. Earlier this week, Chinese media posted a resignation letter from SMIC co-CEO Liang Mong Song.

Accordingly, Mr. Liang warned that the pressure from the US is “seriously threatening the development of advanced technology at SMIC”. At the same time, the CEO said he was worried about board appointments.

Reports said Mr. Liang resigned to protest the appointment of Mr. Chiang Shang Yi to the board of directors. Mr. Chiang is a former COO of Taiwan chip maker TSMC. In just a week, shares of SMIC fell nearly 10%, the worst level since September.

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The Trump administration has increased pressure on Chinese businesses in the final weeks of his term. Photo: Reuters.

Most of China’s chip supplies are now coming from foreign companies. These companies supply the materials for every product, from smartphones and computers to Chinese telecommunications equipment.

Last year, the country imported the volume of valuable chips 306 billion USD, equivalent to 15% of the total import value of the country, according to government statistics.

The SMIC is a key part of the Chinese government’s goal of semiconductor autonomy, to fuel its ambitions for future technology leadership.

Earlier this year, the group affirmed that it wanted to invest heavily in technology and keep up with global competitors. Most of SMIC’s major shareholders are state-owned.

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Huawei’s global sales were seriously affected by US sanctions. Photo: Reuters.

But in fact, SMIC is still 3-5 years behind leading companies in the industry such as Itel, Samsung and TSMC. Analysts say they have a long way to go to become the world’s top producer. Plus, the pressure from Washington could make the goal even more distant.

In early December, SMIC, energy company CNOOC and a number of other businesses were listed by the US Department of Defense as companies owned or controlled by the Chinese military. That means these companies will be embargoed and US investors can’t pour money into them.

Previously, SMIC confirmed that being on the list “has no significant impact” on the group. They also deny having a relationship with the Chinese military. However, CNN any restrictions coming from the US are worrying.

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