PRC "chip darling" faces uncertainty as US rules bite, EU toughens up while German co's clash with Berlin over China & Tesla gets tax break after Musk backs Taiwan annexation -- China Boss 10.17.22
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PRC “chip darling” faces uncertainty as US restrictions bite
“Leading chip equipment suppliers have suspended sales and services to semiconductor manufacturers in China” after US officials announced new restrictions earlier this month banning exports of American semiconductor equipment to China, the Financial Times reported. The new restrictions impose "a licence requirement for exports of US tools or components to China-based fabrication plants," as well as "for exports of items used to develop Chinese homegrown chip production equipment,"and U.S. citizens must now obtain permission for "providing support to Chinese [fabrication plants]," FT said.
FT:
ASML, the Netherlands-based global leader in chipmaking equipment, has told its US staff to stop serving all Chinese customers while it assesses the sanctions.
…Lam Research started pulling out support staff from China-based chipmakers, including memory chip producer Yangtze Memory Technologies Corp. It asked employees to “stay away from fabs in China for now”, said a Lam employee who asked for anonymity because of the matter’s sensitivity.
Lam also suspended presale negotiations with Chinese customers and withdrew staff participating in building new fabs in China, according to two employees with direct knowledge.
Applied Materials and KLA also stopped offering services for China-based manufacturing lines producing advanced chips from Wednesday, said three sources familiar with the situation.
American tech giant Apple has also “put on hold plans to use memory chips from China's Yangtze Memory Technologies Co. (YMTC) in its products.” according to Nikkei Asia.
In a subsequent move to hobble China’s semiconductor industry, the Biden Administration also added over 30 organizations, including China’s “chip darling” Yangtze Memory Technologies Corp. (YMTC), to the U.S. Department of Commerce’s “unverified list”. The UVL is a kind of purgatory for Chinese firms as it is not a clear and decisive ban but still prohibits U.S. companies from sharing technology and know-how without a license.
Washington’s new regulations were not wholly unexpected. YMTC employees told FT that YMTC “has been stockpiling foreign equipment for months in anticipation that the US is preparing to kneecap one of China’s national champions.”
Nonetheless, “the severity of the US regulations stunned many in the chip industry, potentially jeopardizing the operations for hundreds of Chinese semiconductor companies,” Bloomberg said.
Bloomberg:
The Chinese government has made it a national priority to build a domestic semiconductor industry, pouring tens of billions of dollars into the effort. This year, President Xi Jinping renewed calls for the country to develop the technologies critical for national security, invoking the so-called “whole nation system” that propelled China’s space and nuclear weapons programs
The Biden rules dealt a serious setback to that effort. Chip stocks and related companies tumbled across the country. Semiconductor Manufacturing International Corp. fell 9.3% over three days, as as Bloomberg Intelligence analyst Charles Shum slashed his estimate on 2023 growth by 50%. Naura Technology Group Co., a leading chip equipment maker, fell by its daily limit for two days in a row.
Jon Bateman, a senior fellow in the Technology and International Affairs Program at the Carnegie Endowment for International Peace, wrote last week in Foreign Policy that “[t]he controls, more so than any earlier U.S. action, reveal a single-minded focus on thwarting Chinese capabilities at a broad and fundamental level.”
Bateman, Foreign Policy:
In short, America’s restrictionists—zero-sum thinkers who urgently want to accelerate technological decoupling—have won the strategy debate inside the Biden administration. More cautious voices—technocrats and centrists who advocate incremental curbs on select aspects of China’s tech ties—have lost. This shift portends even harsher U.S. measures to come, not only in advanced computing but also in other sectors (like biotech, manufacturing, and finance) deemed strategic. The pace and details are uncertain, but the strategic objective and political commitment are now clearer than ever. China’s technological rise will be slowed at any price.
For the rest of FT’s update, World’s top chip equipment suppliers halt business with China, click here. For Nikkei Asia’s report, Apple freezes plan to use China's YMTC chips amid political pressure, click here.
For FT’s report, China’s chip darling YMTC thrust into spotlight by US export controls, click here. For Bloomberg’s update, US Chip Suppliers Pull Back From China’s Yangtze Memory After Biden Ban, click here. For Bateman’s Foreign Policy analysis, Biden Is Now All-In on Taking Out China, click here.
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