Shares in Semiconductor Manufacturing International Corporation (SMIC), China’s largest contract chip manufacturer, took a significant hit on Thursday following calls from two U.S. congressmen to impose additional export restrictions on the company. The congressmen’s remarks came after Huawei Technologies unveiled the Mate 60 Pro, a Chinese smartphone powered by an advanced chip believed to have been manufactured by SMIC.
Last week’s product launch surprised industry experts, who questioned how SMIC, headquartered in Shanghai, could produce such a chip given the United States’ extensive efforts to limit China’s access to foreign chip technology. TechInsights, a Canadian research organization specializing in semiconductors, later confirmed that the smartphone contained a new 5G Kirin 9000s processor developed specifically for Huawei by SMIC.
Jefferies analysts described this development as a “big tech breakthrough for China,” fueling concerns that the U.S.-China tech conflict may intensify.
U.S. Representative Mike Gallagher, chair of the U.S. House of Representatives committee on China, called on the U.S. Commerce Department to halt all technology exports to both Huawei and SMIC, asserting that SMIC may have violated U.S. sanctions, as this chip likely required U.S. technology. “The time has come to end all U.S. technology exports to both Huawei and SMIC to make it clear that any firm that flouts U.S. law and undermines our national security will be cut off from our technology,” Gallagher stated.
In response to these developments, SMIC’s shares plummeted 8.3% in Shanghai and 7.6% in Hong Kong on Thursday. China’s second-largest chip foundry, Hua Hong Semiconductor, also experienced a 5.8% decline.
Texas Republican Michael McCaul, chair of the House Foreign Affairs Committee, expressed concern about the possibility of China attempting to monopolize the production of less-advanced computer chips. “We talked a lot about advanced semiconductor chips, but we also need to look at legacy,” McCaul noted, referring to older computer chip technology not subject to export controls. He suggested that China might seek dominance in the legacy semiconductor chip market as well.
Memes circulating on Chinese social media humorously designate U.S. Commerce Secretary Gina Raimondo as the unofficial brand ambassador for Huawei’s Mate 60 series. These memes playfully allude to the idea that U.S. sanctions, enforced by the U.S. Commerce Department, indirectly contributed to the smartphone’s launch as Chinese firms had to rely on available technology.
Huawei was added to a U.S. blacklist in May 2019 due to national security concerns, necessitating U.S. export licenses for companies supplying technology to the Chinese tech giant. SMIC faced similar restrictions in 2020 amid concerns about its potential ties to the Chinese military, allegations that the company has vehemently denied.
Jefferies analysts anticipate the Biden administration tightening restrictions on chip exports to China in the coming months, further limiting China’s access to advanced U.S. semiconductors. They assert that the U.S.-China tech conflict is likely to escalate, particularly as China achieves significant breakthroughs in semiconductor technology.
As the global tech landscape becomes increasingly complex, the ramifications of these export restrictions and their impact on the broader geopolitical stage remain subjects of intense debate and scrutiny.
