The US government has imposed long-rumoured sanctions on China’s biggest chipmaker. China’s tech industry relies heavily on Semiconductor Manufacturing International Corporation for its micro processors. But the damage from this latest escalation of the trade war will be felt by US as well as Chinese businesses.
The group’s Shanghai-listed shares fell 7 per cent on Monday after Washington said exports to SMIC posed an “unacceptable risk” of being diverted to “military end use”. Nearly a third of SMIC’s suppliers are American. They now need approval to export US chipmaking software and equipment to SMIC. Military use is a broad enough risk for supplies to be cut off entirely.
Without US machinery, China’s short-term chip production will suffer. But much of the hurt that can be inflicted on SMIC has already been done. ASML Holding, the Dutch maker of crucial equipment needed to make high-end chips, was once SMIC’s biggest supplier. It has been unable to secure approval to export to SMIC since last year, reportedly due to US influence.