Chinese semiconductor stocks decline after the U.S. calls for further restrictions on high-end technology

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Last Updated on October 10, 2022 by Bitfinsider

After the U.S. announced new export controls aimed at limiting Beijing’s capacity to develop advanced military equipment, Chinese semiconductor stocks slumped on Monday.

Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced in a press release on Friday that corporations must apply for a license in order to sell certain sophisticated computer semiconductors or related manufacturing equipment to China.

The measures, which went into force this month, extend on previous U.S. efforts to restrict Chinese corporations’ access to crucial technologies.

Notably, international companies who use American equipment to manufacture certain high-end chips for sale in China will now require a license.

The U.S. announcement stated, “These guidelines make it clear that foreign government actions that impede BIS from making compliance assessments will harm a company’s access to U.S. technology via addition to the Entity List.”

The United States announced on October 21 that it will award a temporary license until April of next year, allowing enterprises to manufacture certain high-tech products for export in China.

Chinese semiconductor stock prices fall

Semiconductor Manufacturing International Corporation, the largest chipmaker in China, traded 3% down in Hong Kong on Monday amid a broader market decline.

As of Monday afternoon, Hua Hong Semiconductor was down almost 9%, while Shanghai Fudan Microelectronics was down more than 20%.

On Friday, shares of U.S. chipmakers Nvidia and AMD plummeted as concerns about decreasing demand weighed on the sector.

According to an official English-language translation, Chinese Ministry of Foreign Affairs Spokesperson Mao Ning stated over the weekend, “The United States has been misusing export control mechanisms to arbitrarily prohibit and cripple Chinese firms.”

She stated, “Such conduct violates the principle of fair competition and international trade regulations.” It will not only undermine the legitimate rights and interests of Chinese enterprises, but also the interests of American companies.

Mao did not outline any Chinese retaliation intentions.

The worldwide supply chain for semiconductors is extremely specialized. China has invested extensively in domestic players in an effort to catch up to the handful of corporations with the most advanced technology.

Taiwan Semiconductor Production Company possesses the most modern semiconductor manufacturing capacity in the world. ASML is the only business in the world capable of producing the incredibly complicated machinery required to manufacture the most modern chips.

On the other hand, U.S. companies such as Lam Research, KLA, and Applied Materials are market leaders in the production of other tools required to manufacture chips.

How detrimental the new U.S. regulations will be to business remains to be seen.

The United States government already placed Huawei and SMIC on a blacklist requiring vendors to obtain a license before to selling to them.

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