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US squeezes China’s greatest chip-maker SMIC

By Leo Kelion
Technology desk editor

picture copyrightSMIC/Getty Images

The US Department of Commerce has written to American suppliers of China’s greatest chip producer, warning them of “unprecedented risks” that their merchandise could possibly be utilized by the Chinese army.

The letter reminds the corporations they need to apply for licences to ship managed objects to Shanghai-based SMIC.

But it doesn’t seem that Washington has determined whether or not or to not add the agency to a commerce blacklist.

SMIC has denied any army hyperlinks.

And it stated it had not acquired any formal discover of latest restrictions from the US.

But the newest motion induced Semiconductor Manufacturing International Corporation’s shares to drop about 7% in Hong Kong commerce.

The fall adopted a steeper decline earlier this month when the Pentagon first revealed it had proposed harder restrictions in opposition to the enterprise, together with including it to the federal government’s Entity List.

That would forestall any firm promoting items or companies to SMIC that concerned US mental property with out first getting particular permission.

Such a step has already been taken in opposition to SMIC’s greatest consumer – Huawei – which has induced main disruption to the telecoms kit-maker’s enterprise.

Chinese state media had beforehand reported that SMIC was amongst many corporations that had

requested a US licence to continue supplying Huawei.

But one trade analyst urged the newest transfer indicated the US was more and more centered on SMIC itself.

“Denial of US semiconductor manufacturing equipment would put SMIC at a severe disadvantage, because most of that technology comes from American sources,” defined Jim Tully.

“China might intention to grow to be self-sufficient in these applied sciences over the long run, nevertheless it appears to me that it might take 10-plus years to take action.

“And within the brief time period, the tools and associated software program SMIC already makes use of nonetheless wants ongoing help and upkeep from its producers.”

This has led to hypothesis that SMIC’s survival could now be at stake.

Blocked sale

SMIC was based in 2000, and has since grow to be probably the most outstanding chip-making foundry in mainland China.

Until not too long ago, it was considered as being a beneficiary of rising US-China pressure as a result of it was anticipated to profit from Beijing’s drive to make the nation’s tech sector self-sufficient.

The agency has raised near $10bn (£7.7bn) this yr through a share sale and different means to increase its operations.

In addition to Huawei, SMIC’s purchasers embrace lesser-known Chinese chip designers together with Gigadevice and Unisoc, in addition to worldwide corporations together with Qualcomm and Broadcom.

However, its most superior merchandise are stated to lag two generations behind what rival producers – together with Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea’s Samsung – are able to, as a result of SMIC can’t presently make transistors as small as they’ll. This means its merchandise usually are not appropriate to be the state-of-the-art processors within the newest smartphones or different superior devices.

The cause for that is partially on account of present restrictions Washington has imposed on the agency.

At current, the one solution to take advantage of superior logic chips is to make use of tools made by a Dutch firm, ASML.

picture copyrightGetty Images
picture captionASML is the most important provider of lithography semiconductor manufacturing machines
SMIC ordered a $150m lithography machine – which makes use of lasers centered by big mirrors to print miniscule patterns on silicon – from ASML in 2018. But Reuters reported the White House convinced the Dutch government to block the export on safety grounds.

A spokesman for ASML declined to remark when requested by the BBC whether or not the deal was nonetheless in limbo.

Adding SMIC to the US Entity List would forestall the Chinese agency sourcing {hardware}, software program and chemical supplies from different suppliers.

For now, the corporate is hoping to keep away from that final result by clearly denying it provides merchandise to the People’s Liberation Army.

“Any assumption of the corporate’s ties with the Chinese army are unfaithful statements and false accusations,” it has stated.

But this has been known as into query by others.

One Chinese state-owned newspaper has claimed the case illustrates the need for a “new long march” with a purpose to “management all analysis and manufacturing chains of the semiconductor trade”.
Bloomberg has reported that Beijing plans to unveil new policies to support the sector in October.

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