Just-in: The US Launches Latest Crackdown on China's Chips, Striking its Semiconductor Manufacturing

 

The US will launch its third strike package in three years to suppress China's semiconductor development on Monday, Dec. 2. This time, the US package emphasizes export restrictions on Chinese companies linked to chip manufacturing and chip-making tools, according to two people familiar with the matter.

 

The package will restrict nearly 20 semiconductor companies, two investment firms, and more than 100 chip-making tool makers from China. These companies will be placed on a list of entities prohibiting the US suppliers from shipping to them without special permission.

 

The US will also impose additional shipment restrictions on China's largest chip manufacturer, SMIC (HKG: 0981). For the first time, the entity list will include two companies that invest in the chip industry: Wise Road Capital and Wingtech Technology Co.

 

The package is one of the last large-scale measures initiated by the Biden administration to prevent China from making chips enhancing its military capability and threatening the US national security. China has achieved self-sufficiency in the semiconductor industry but its technology still lags behind the industry leaders.

 

In addition to China, the US export restriction package will negatively affect its allies. The package will prevent foreign manufacturers from shipping chip-making equipment and items with US chips to China. Certainly, equipment exporting from Malaysia, Singapore, Israel, and South Korea to China are restricted by it. However, the package will leave Japan and the Netherlands which dominate the advanced chip-making equipment production unrestricted.

 

The latest update of the plan is to limit HBM 2 memory exports to China. HBM 2 memories, a required element for AI chips, are typically made by South Korea's Samsung and SK Hynix (KRX: 000660). Industry analysts expect only Samsung Electronics (KRX: 005930) to be affected by this limitation.

 

This Biden administration crackdown on China's semiconductor and AI development is expected to be retained by President-elect Trump, who takes office in 2025.

 

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