China’s tech ambitions are in danger because of U.S. sanctions on chipmaker SMIC

The U.S. government has reportedly imposed restrictions on exports to SMIC, China’s biggest chip manufacturer, a move that threatens Beijing’s push to become more self-reliant in one of the most critical areas of technology. Suppliers for certain equipment to SMIC will need to apply for an export license, according to a letter sent to companies by the U.S. Department of Commerce, reported by several media outlets. The commerce department claims there is “unacceptable risk” that equipment sold to SMIC may be diverted to “military end use.”

The move threatens to hit at the heart of China’s plans to boost its domestic semiconductor industry, a need that has been accelerated by the trade war with the U.S. SMIC is seen as a critical part of China’s ambitions and the commerce department’s sanctions could hold back the company’s development for several years, experts warned. SMIC’s Shanghai-listed shares were down over 6%, while its Hong Kong shares fell over 5%.

Semiconductors are critical components in a whole host of consumer electronics that we use. As an increasing number of devices become “smart” and connected to the internet, they will become more and more crucial in new areas, such as automobiles. Semiconductors have an extremely complicated supply chain. It’s not just about companies that manufacture the chips — there are also design companies involved, as well as firms that make tools that enable manufacturing in the first place.

U.S. sanctions on chipmaker SMIC hit at the very heart of China’s tech ambitions, CNBC, Sep 28