US’ harshest chip export ban on China could risk as much as 30% of some global chip giants’ revenue - Global Times

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

The US government on Friday released a broad set of technology export controls, including what said to be the "harshest" ban on shipment of certain semiconductor chips made  anywhere in the world with US equipment to China, further intensifying its so-called tech decoupling push and threatening to wreak havoc in the highly globalized chip supply chain.

While the raft of measures is widely regarded as the biggest shift in US policy toward shipping technology to China since the 1990s, Chinese market watchers and industry insiders said that the move further demonstrated that the US' multi-year crackdown campaign against China's tech sector has failed to achieve its goal of strangling China's tech rise.

Moreover, the move, while aimed at further cutting China off from foreign chips, will hurt multinationals from around the world, including chip giants in the US, which have benefited greatly from the vast Chinese market, experts noted, warning that disruptions posed by the US could stall development in the global chip industry for years.

Global damage

Commenting on the US' move, Mao Ning, a spokesperson for China's Foreign Ministry, said on Saturday that the US' new export controls will hinder international tech exchanges and economic cooperation, and undermine the stability of global industrial and supply chains and the recovery of the world economy.

The US' politicization and weaponization of technology, economic and trade issues will not stop China's development, but will only hurt the US itself, the spokesperson added.

The US' export control measures on Friday, if effective, could hobble China's chip manufacturing industry by forcing US and foreign companies that use US technology to cut off support for some of China's leading factories and chip designers, according to Reuters.

Also on Friday, the US added China's top memory chipmaker YMTC and 30 other Chinese entities to a so-called "unverified" trade list.

Since the Trump administration, the US has never given up the suppression of China's chip industry, but the escalating crackdown shows that the previous crackdown campaign has not worked, Ma Jihua, a veteran telecommunication industry analyst, told the Global Times on Saturday.

The Biden administration is well aware that the marginal effect of the chip crackdown gets smaller, but it has no better options, Ma added.

"It's extremely hard for the Biden administration to cut global chip industrial and supply chains and exclude China with simply a handful of policies," Fu Liang, an independent tech analyst, told the Global Times on Saturday.

He said that the US' reckless move will hurt the interests of many countries involved and may wind up weakening its own leading position in the international technology venue and excluding itself from the global industrial and supply chains.

"Out of considerations for their own interests, tech companies across the world may not thoroughly follow the US policies," Fu said, noting that foreign suppliers are worried that the US' chip export restrictions may directly reduce their profits from the world's largest chip consumer and that China's swift domestic replacement will mean no more orders for them.

One example cited by market watchers is US allies' shifting attitude toward the so-called Chip 4 alliance. While major chip producers like South Korea and Japan initially showed a cooperative attitude toward the move, but they slowly shifted toward being cautious. There has been no major update on the alliance other than some meetings.

"The resistance is getting bigger and their willingness is getting lower," Ma said. 

As the Biden administration intensifies its tech decoupling push, more and more US and global businesses will see increasing losses. For example, after the US government prohibited US semiconductor firm Nvidia from selling sophisticated chips to China at the end of August, the company estimated that it may lose approximately $400 million in potential sales to China in the third quarter and actively engaged with the US government in seeking exemptions.

If the new measures are strictly implemented, it could put as much as 30 percent of some US and global chip industry giants' total revenue at risk because China's revenue accounts for one-third of their total revenue, Han Xiaomin, general manager of Jiwei Insights in Beijing, told the Global Times on Saturday.

Global chip companies are already starting to consider ways to overcome the impact of the 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 this end," the company said in a statement sent to the Global Times on Saturday. "We are also prepared to operate our manufacturing plants in China smoothly, under the premise of abiding by international rules."

The US' move will also cause the most harm to its own R&D. "As it costs vast financial and human resources investment in the R&D of cutting-edge chips, US companies will unlikely see much returns without chip exports to China and could barely re-invest in future R&D," said Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing.

The Semiconductor Industry Association, which represents 99 percent of the US semiconductor industry by revenue and nearly two-thirds of non-US chip firms, on Friday urged the US government to implement the rules in a targeted way - and in collaboration with international partners - to help level the playing field and mitigate unintended harm to US innovation.

'Won't stop China'

As for China, the US' latest measures will unlikely cause any significant additional impact on the Chinese chip industry, which has withstood the US' multi-year crackdown campaign and has actually seen great development in recent years, experts noted.

Several leading semiconductor companies in China, including major producers and component suppliers, reported strong results in the first half of 2022, despite the US' relentless crackdown against China's chip industry.

One of these winners is China's largest chipmaker, Semiconductor Manufacturing International Corp (SMIC), which reported better-than-expected revenue of $1.903 billion in the second quarter of this year, up by 3.3 percent from the previous quarter and up 41.6 percent year-on-year. Bloomberg also reported in July that SMIC started shipping 7nm chips.

The Chinese government also gives full play to China's socialist system's advantages, which allows the nation to concentrate its strength and efforts on major things, in the country's chip industry.

"It is expected that the chip industry will see some breakthrough in one or two years," Ma said.

Gao Shiwang, a director with the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, said that the latest US curb could only slow, not strangle, China's tech rise.

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