China’s biggest chip-maker SMIC got squeezed by US Government

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Department of Commerce United States have forwarded letter to American suppliers about  China’s biggest chip manufacturer SMIC and issued warning to SMIC for their products being associated with unprecedented risks  and their products might be misused by the Chinese military – PLA.

This letter also have recommended SMIC that they need to apply for licences to ship controlled items to Shanghai-based SMIC.

But till now it appears that Washington has not yet decided to blacklist SMIC from tarde .It is not yet confirmed.

SMIC said that they have not received any formal notice of latest restrictions from the US.This setback have caused Semiconductor Manufacturing International Corporation’s shares dropped about 7% in Hong Kong trade even though they have denied any link with PLA .

After Pentagon revealed about hard restrictions against SMIC it started declining earlier this month .That would prevent any company selling goods or services to SMIC that involved US property without first getting special permission.

Similar actions has already been taken against Huawei which is SMIC biggest client. It have impacted badly to the telecoms kit-maker’s industry.SMIC also had requested a US license to continue supplying Huawei as per Chinese state media report earlier.

US was focused to act on SMIC as per one of the analyst suggested about new move indicated.As explained by Jim Tully that SMIC will have severe disadvantages due to Denial folks semiconductor manufacturing equipment as all main technology comes from American sources.

China is aiming to become independent in these technologies but it will take little bit longer it may span over 10 years or even longer considering they are on top of it. Major reason may be hardware and related software being used by SMIC needed for support and maintenance from their OEM.

Looks like they have very tough time ahead.Semiconductor Manufacturing International Corporation now mostly termed as SMIC was setup in 2000 and have become one of the top chip-making organization in China.

Until recently, it had been viewed as being a beneficiary of rising US-China tension because it had been expected to profit from Beijing’s drive to form the country’s tech sector self-sufficient.The firm has raised on the brink of $10bn (£7.7bn) this year via a share sale and other means to expand its operations.

SMIC’s main clients including Huawei Qualcomm Broadcom Giga Device and Unisoc.Anyhow SMIC most advanced products considered behind by at least two generations as compared to rival manufacturers like Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea’s Samsung capabilities.

TSMC & Samsung can make small transistors as compared to SMIC .You can say on this behalf that SMIC products are not capable for state-of-the-art processors which is used in latest smartphones or any advanced gadgets. Reason behind this existing restrictions Washington has imposed on the firm.

Thanks to ASML a Dutch Company for making for most advanced logic chips is to use. As per previous report SMIC order of value $150 million was turned down by Dutch Government after getting convinced by White House as per Reuter’s reports on security ground. Even though it was not confirmed by ASML Neither officially nor to any journalist.

Once SMIC added to US Entity List it will be not allowed to source hardware, software and chemical materials from any other suppliers.

As of now corporate is expecting to avoid to supply any products to the PLA of China. SMIC have quoted that any relationship of company with PLA is not true .It is just false accusations.But this is definitely huge setback to China and they need long time to recover from it.Anyone can understand by looking at their share market performances.

 

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