Shares of China's biggest contract chipmaker, Semiconductor Manufacturing International Corp (SMIC), dipped by a staggering 23% after the USA government stated that it was contemplating applying export restrictions on the firm, making it the latest casualty in the ongoing tech war between U.S and China.
China has lashed out at the USA government over potential export restrictions on SMIC, the country's biggest chipmaker. SOS has defended the report and argued that SMIC was "deeply embedded" in military projects. Adding further complications, the US Department of Commerce announced on August 17 that all foreign semiconductor company are prohibited from selling chips to Huawei that have been developed or produced using US software or technology, unless a license has been obtained in advance.
SMIC operates five chip-making plants in China, and can reportedly create almost half a million wafers a month.
The stock was the fifth most actively traded by turnover in early trade.
SMIC, China's biggest semiconductor maker, said on Monday that it was 'in complete shock'. Last month, the United States blacklisted 24 Chinese companies and targeted individuals it said were part of construction and military actions in the South China Sea, its first such sanctions against Beijing over the disputed strategic waterway.
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Discussions about blacklisting SMIC were held as the grace period Washington set for additional sanctions against Huawei draws to a close on September 15.
But the Chinese semiconductor company said on WeChat that it strictly follows the laws and regulations of relevant nations as it had maintained cooperative relations with global chipmaking equipment suppliers for years.
The planned curbs come at a time when SMIC had been expected to more than double its spending this year to make higher-end chips, helped by $6.6 billion in funds from a secondary share listing in July and support from state firms.
Yuanta expects "UMC to be a major beneficiary from the US' potential ban", given the similarities in revenue scale and foundry technology offerings of the two companies, the note said.
"SMIC would be unable to update the software of any of its USA machines or have personnel from suppliers helping it to get them working", Richard Windsor, founder of research firm Radio Free Mobile, told the BBC. It's also noted that the USA government is anxious that the Chinese government is trying to develop competitors for the American industry. As a result, the company looks to be concentrating its resources on growing its Infrastructure-as-a-Service (IaaS) business, Huawei Cloud.