US Sanctions Threat Wipes 23% Off Value Of Largest Chinese Chipmaker Semiconductor Manufacturing International Corp (Smic)
Black Monday for the largest Chinese chip maker Smic. Shares of chipmaker Semiconductor Manufactoring International Corporation plummeted nearly 23% in Hong Kong yesterday, losing $ 4 billion. One fifth of their value.
Reason? Friday press leaks (including Reuters ) revealed the possibility of sanctions coming from the United States.
The sanctions against SMIC would be the latest move in an ongoing battle between Washington and Beijing over who controls the technologies of the future.
The chip maker could be the next target of a commercial ban that has already hit Chinese companies Huawei and Zte.
This would prevent American suppliers from selling the technology needed by Smic to produce their chips without special permission. On Friday, Beijing said it was "firmly opposed" to the US move.
The Department of Defense declined to comment on the press reports.
BLACK MONDAY IN THE BAG
Monday 's actions SMIC collapsed both in Hong Kong, where they lost almost 23%, both in Shanghai, where it fell by more than 11%. By July, the company raised nearly $ 7 billion in a secondary listing on the Shanghai Star Market, China's answer to the Nasdaq.
Shares of Taiwanese rival Tsmc also closed 0.7% lower in Taiwan. Unlike Samsung's shares, which rose 1.6% in Seoul.
PROHIBITION OF EXPORTING ON THE HORIZON
According to Reuters and other media outlets, the US Department of Defense and other US agencies are considering banning exports to Smic. The chipmaker could therefore be added to a list of companies that the US government believes are undermining American interests.
This would be a significant challenge since US blacklisted companies cannot trade with US companies without first obtaining a license to do so.
The escalation of restrictions on China's telecommunications giant Huawei, added to the list last May, is putting its global operations to the test.
SMIC IN SHOCK
The stock crash wiped out about $ 4 billion from its market value.
WHAT SMIC DOES
The company is a major semiconductor supplier to Chinese companies, including Huawei, and also serves international customers including Qualcomm.
"Semiconductor Manufacturing International Corporation is the first Chinese microchip manufacturer, the fifth in the world in terms of turnover, partially state-owned, has its headquarters in Shanghai, production sites throughout mainland China and several branches in the West, including Italy" . Sole 24 Ore stressed. “Smic, founded in 2000, is a“ foundry ”that does not design but produces chips for third parties. Despite public support, it is chasing Taiwanese rival Tsmc, which is a leader in terms of production volumes and technology. Recently Smic has introduced the production of 14 nanometer processors, two generations behind Tsmc which has arrived at miniaturized processors up to 7 nanometers ".
SHAREHOLDER OF THE ITALIAN LFOUNDRY
Smic was also a shareholder of the Italian Lfoundry , the first company in the province of L'Aquila and second largest in the whole of Abruzzo.
Since July 2019, the Abruzzo-based company has seen the entry of two new Chinese partners: Smic (70%) and Wuxi Xichanweixin Semiconductor Co. Ltd (30%).
Today the company is controlled by Hong Kong-based Sparc Semiconductor, which holds 70% of the share, and by China's Wuxi Xichanweixin Semiconductor. Smic has in fact passed the baton to Sparc.
FINISHED UNDER THE WASHINGTON LENS
According to the Reuters report – which cites an anonymous US official and two former officials informed on the matter – the Trump administration is suspicious of Smic's relationship with the Chinese army.
THE DEFENSE OF SMIC
Link denied by the chipmaker. The company "manufactures semiconductors and provides services exclusively for civil and commercial end users and end uses," Smic said in a statement filed with the Hong Kong Stock Exchange. "We have no relations with the Chinese army."
Smic also added that it is "open to sincere and transparent communications" with US government agencies "in the hope of resolving potential misunderstandings".
THE REPLICA OF BEIJING
The Beijing government also takes the field in defense of Smic.
Yesterday, the Chinese foreign ministry said the United States was "blatantly bullying" Chinese companies and urged it to stop oppressing foreign companies.
THE WAR OF THE TRUMP ADMINISTRATION ON CHINESE COMPANIES
The inclusion of Smic on the US blacklist could make the chip maker the next target of a trade confrontation that has already threatened the survival of the Chinese tech company Huawei and forced Bytedance to negotiate the sale of the American operations of the TikTok app.
THE IMPORTANCE OF EXPORTS
The consequences of not being able to market with US companies would be devastating. Most of the main semiconductor companies, Smic but also Tsmc, rely on US machines and technologies. The latter is experiencing difficulties due to relations with Huawei.
HUAWEI CHIPS WILL BE HIT SOON
In fact, starting from September 15, Huawei will no longer be able to produce its proprietary chipsets due to the ban placed by the Trump administration.
As Start explained, "the decision of the Department of Commerce for Huawei means preventing it from having the chipsets of the Taiwanese Tsmc, a company that produces chipsets for all the major smartphone manufacturers in the world".
WHAT HAPPENS AT TSMC
“Until now Tsmc was used to sell its products to HiSilicon, the subsidiary of Huawei that deals with the production of Kirin chipsets. From 15 September it will not do it again ”, recalled Marco Orioles on Start . But the Taiwanese manufacturer immediately ran for cover.
THE FUTURE OF CHINESE CHIPMAKERS
Sanctions against SMIC would damage China's chip manufacturing ambitions. The Dragon wants to build a cutting-edge semiconductor manufacturing industry.
"China has allocated more than $ 200 billion trying to convince the country's chip manufacturing industry to develop faster and more advanced semiconductors," Paul Triolo, of Eurasia Group, wrote in a statement last week, reported by CNN .
Adding Smic to the trade blacklist would create "significant new barriers to semiconductor development in China".
“Yet so far it has achieved limited results”, Triolo concluded, adding that Smic “is three to five years behind the industry leaders Intel, Samsung and Tsmc”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/semiconduttori-smic-cinese-sanzioni-usa/ on Tue, 08 Sep 2020 14:42:43 +0000.