US toughest chip export ban to China could put some global chip giants at risk up to 30% of revenue

US toughest chip export ban to China could put some global chip giants at risk up to 30% of revenue
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Workers manufacture chips at Anhui Dongke Semiconductor Co in east China's Anhui Province on Saturday.  The company is located in Anhui Ma'anshan Economic and Technological Development Zone and is mainly engaged in the design, production and sales of green power chips.  Photo: VCG

Workers manufacture chips at Anhui Dongke Semiconductor Co in east China’s Anhui Province on Saturday. The company is located in Anhui Ma’anshan Economic and Technological Development Zone and is mainly engaged in the design, production and sales of green power chips. Photo: VCG

The U.S. government on Friday issued a broad set of technology export controls, including what is said to be the “hardest” ban on shipments of some semiconductor chips to China with U.S. equipment anywhere in the world, further intensifying the so-called technology divergence. the threat and force to wreak havoc on the highly globalized chip supply chain.

While a series of measures is widely regarded as the biggest change in US policy on technology shipments to China since the 1990s, Chinese market watchers and industry experts say the move further escalates the US multi-year pressure campaign against China’s technology sector. He said it showed. It failed to achieve its goal of stifling China’s technological rise.

What’s more, this move will hurt multinational companies from around the world, including chip giants in the United States, which have benefited greatly from the vast Chinese market, while aiming to cut off more foreign chips from China, experts pointed out to the disruptions caused by China. . The US could halt development in the global chip industry for years.

Global damage

Chinese Foreign Ministry spokesman Mao Ning commented on the US move on Saturday, saying the new US export controls would hinder international technology exchanges and economic cooperation and undermine the stability and recovery of global industrial and supply chains. world economy.

The spokesperson added that the US politicizing and arming technology, economic and commercial issues will not stop China’s development, it will only harm the US itself.

According to Reuters, US export control measures on Friday, if effective, could disrupt China’s chip manufacturing industry, forcing US and foreign companies using US technology to cut support for some of China’s leading factories and chip designers.

Also Friday, the US added YMTC, China’s top memory chip maker, and 30 other Chinese organizations to its so-called “unconfirmed” trade list.

Since the Trump administration, the U.S. has never given up on cracking down on China’s chip industry, but the mounting pressure shows that the previous pressure campaign hasn’t worked, Ma Jihua, a veteran telecommunications industry analyst, told the Global Times on Saturday.

Ma added that the Biden administration is aware that the marginal impact of chip printing is shrinking, but that they have no better options.

“It is extremely difficult for the Biden administration to cut the global chip industry and supply chains and exclude China with a handful of policies,” Fu Liang, an independent technology analyst, told the Global Times on Saturday.

He said the US’s reckless move would harm the interests of many concerned countries and could result in undermining its own leading position in international technology and excluding itself from global industry and supply chains.

“Tech companies around the world may not fully follow US policies with their own interests in mind,” Fu said, noting that foreign suppliers are concerned that US chip export restrictions could directly reduce profits from the world’s largest chip consumer. and China’s rapid domestic change means there will be no more orders for them.

An example cited by market watchers is the changing attitudes of US allies towards the so-called Chip 4 alliance. Major chip manufacturers such as South Korea and Japan initially took a cooperative stance against this move, but gradually began to act cautiously. Except for some meetings, no major updates were made about the alliance.

“The resistance is growing and their willingness is dwindling,” Ma said.

More and more US and global businesses will see increasing losses as the Biden administration intensifies the pressure on technology separation. For example, after the U.S. government banned U.S. semiconductor firm Nvidia from selling sophisticated chips to China at the end of August, the company estimated it could lose about $400 million in potential sales to China in the third quarter and was actively engaged with the U.S. government. seeking an exemption.

Han Xiaomin, general manager of Jiwei Insights, said that if the new measures are strictly implemented, it could put at risk up to 30 percent of the total revenues of some US and global chip industry giants, as China’s revenues make up a third of their total revenues. He’s in Beijing, he told the Global Times on Saturday.

Global chip companies are already considering ways to overcome the impact of new US export controls.

“SK Hynix is ​​prepared to do its best to obtain a license from the US government and will work closely with the South Korean government to that end,” the company said in a statement sent to the Global Times on Saturday. We are ready to operate our production facilities in China without any problems, provided that they comply with international rules.”

This move of the USA will cause the greatest damage to its own R&D. “Because cutting-edge chips cost large financial and human resources investment in R&D, US companies won’t be able to generate much returns and barely reinvest in future R&D without chip exports to China,” he said. Chinese Academy of Social Sciences in Beijing.

The Semiconductor Industry Association, which represents 99 percent of the U.S. semiconductor industry by revenue and nearly two-thirds of chip firms outside the U.S., on Friday urged the U.S. government to implement the rules in a targeted manner – and in collaboration with international partners. helping level the playing field and reducing unintended damage to US innovation.

‘They won’t be able to stop China’

As for China, the experts pointed out that the latest US measures will not have a significant additional impact on the Chinese chip industry, which has resisted the US multi-year pressure campaign and has actually grown tremendously in recent years.

Several leading semiconductor companies in China, including major manufacturers and component suppliers, reported strong results in the first half of 2022, despite US brutal crackdown on China’s chip industry.

One of those winners, China’s largest chipmaker Semiconductor Manufacturing International Corp (SMIC), reported better-than-expected revenue of $1,903 billion in the second quarter of this year, up 3.3 percent from the previous quarter and 41.6 percent year on year. per year. Bloomberg also reported in July that SMIC has started shipping 7nm chips.

The Chinese government also fully embraces the advantages of China’s socialist system, allowing the country to concentrate its strength and efforts on the important things in the country’s chip industry.

“The chip industry is expected to see some breakthrough in a year or two,” Ma said.

Gao Shiwang, director of the China Chamber of Commerce for Import and Export of Machinery and Electronics Products, said the latest restriction in the US may only slow down rather than stifle China’s technological rise.

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