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CHINA’S TOP CHIPMAKER MAY BE IN HOT WATER AS US LAWMAKERS CALL FOR FURTHER
SANCTIONS AFTER HUAWEI ‘BREAKTHROUGH’

By Laura He, CNN
Updated 9:14 AM EDT, Thu September 7, 2023
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How Biden administration's export ban is choking off China's tech ambitions
(Nov, 2022)
02:55 - Source: CNN

Editor’s Note: Sign up for CNN’s Meanwhile in China newsletter which explores
what you need to know about the country’s rise and how it impacts the world.

Hong Kong CNN  — 

Shares in SMIC, China’s largest contract chipmaker, plunged on Thursday, after
two US congressmen called on the White House to further restrict export sales to
the company.

The comments came after Huawei Technologies introduced the Mate 60 Pro, a
Chinese smartphone powered by an advanced chip that is believed to have been
made by SMIC.

Last week’s launch shocked industry experts who didn’t understand how SMIC,
which is headquartered in Shanghai, would have the ability to manufacture such a
chip following sweeping efforts by the United States to restrict China’s access
to foreign chip technology.

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TechInsights, a research organization based in Canada specializing in
semiconductors, revealed shortly after the launch that the smartphone contained
a new 5G Kirin 9000s processor developed specifically for Huawei by SMIC.

This is a “big tech breakthrough for China,” Jefferies analysts said Tuesday in
a research note.

The development has fueled fears among analysts that the US-China tech war is
likely to accelerate in the near future.

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The Semiconductor Manufacturing International Corp. (SMIC) headquarters in
Shanghai, China, on Tuesday, March 23, 2021.
Qilai Shen/Bloomberg/Getty Images

US representative Mike Gallagher, chair of the US House of Representatives
committee on China, called on the US Commerce Department on Wednesday to end all
technology exports to Huawei and SMIC, according to Reuters.

Gallagher was quoted as saying SMIC may have violated US sanctions, as this chip
likely could not be produced without US technology.

“The time has come to end all US technology exports to both Huawei and SMIC to
make clear any firm that flouts US law and undermines our national security will
be cut off from our technology,” he said.

Shares in SMIC, which stands for Semiconductor Manufacturing International
Corporation, sank 8.3% in Shanghai and 7.6% in Hong Kong on Thursday. Hua Hong
Semiconductor, China’s second largest chip foundry, tumbled 5.8%.

Texas Republican Michael McCaul, who chairs the House Foreign Affairs Committee,
was quoted by Reuters as saying he was concerned about the possibility of China
trying to “get a monopoly” in the manufacture of less-advanced computer chips.

“We talked a lot about advanced semiconductor chips, but we also need look at
legacy,” he reportedly said, referring to older computer chip technology which
does not fall under export controls.

“I think China is trying to get a monopoly on the market share of legacy
semiconductor chips as well. And I think that’s a part of the discussion we’ll
be having,” he said.

US President Joe Biden meets with China's President Xi Jinping during a virtual
summit from the Roosevelt Room of the White House in Washington, DC, November
15, 2021.
Mandel Ngan/AFP/Getty Images

US curbs on microchips could throttle China's ambitions and escalate the tech
war

Chinese state media have touted the development as a sign the country had
successfully “broken US sanctions” and “achieved technological independence” in
advanced chipmaking.


MEMES GALORE

Meme makers on the Chinese internet have even crowned US Commerce Secretary Gina
Raimondo the unofficial brand ambassador for the Mate 60 series.

The memes poke fun at the idea that US sanctions, which are implemented and
enforced by the US Commerce department, may have indirectly led to the launch of
the new phone as China’s homegrown firms had to work with available technology.

Raimondo visited China last week, when the phone was launched. The memes have
gone viral online and been reported on by state broadcaster CCTV.

Before Thursday, SMIC’s shares in Hong Kong had rallied more than 20% within two
weeks due to investor optimism. Huahong Semiconductor jumped 11%.

CNN has reached out to Gallagher’s and McCaul’s offices for comment, but has yet
to receive a response.

A man holds an iPhone 14 as Apple Inc's new models go on sale at an Apple store
in Beijing, China, September 16, 2022.
Thomas Peter/Reuters

Wall Street Journal: China bans use of iPhones for government officials

Huawei was added to a blacklist in May 2019 by the US Commerce Department over
national security concerns. That means companies have to apply for US export
licenses to supply technology to Huawei.

SMIC was also put on the same list in 2020, as US officials were concerned it
could use American technology to aid the Chinese military. SMIC has denied
having any relationship with the Chinese military.

“The fact that China has achieved a big breakthrough in [semiconductor] tech
will likely create more debate in the US about the effectiveness of sanctions,”
said the Jefferies analysts.

They expect the Biden administration to tighten chips ban on China, which was
introduced in October 2022, in the next few months, further limiting China’s
access to advanced US semiconductors.

“Overall the US-China tech war is likely to escalate,” they said.


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ENSURE SECURITY, PREVENT FRAUD, AND DEBUG

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Your data can be used to monitor for and prevent fraudulent activity, and ensure
systems and processes work properly and securely.

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TECHNICALLY DELIVER ADS OR CONTENT

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Your device can receive and send information that allows you to see and interact
with ads and content.

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MATCH AND COMBINE OFFLINE DATA SOURCES

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Data from offline data sources can be combined with your online activity in
support of one or more purposes

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LINK DIFFERENT DEVICES

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Different devices can be determined as belonging to you or your household in
support of one or more of purposes.

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RECEIVE AND USE AUTOMATICALLY-SENT DEVICE CHARACTERISTICS FOR IDENTIFICATION

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Your device might be distinguished from other devices based on information it
automatically sends, such as IP address or browser type.

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STRICTLY NECESSARY COOKIES

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These cookies are necessary for the website to function and cannot be switched
off in our systems. You can set your browser to block or alert you about these
cookies, but some parts of the site will not work.

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