Josh Horwitz and Jason Xu
Shanghai, Oct. 10 (Reuters) – Shares of Chinese technology conglomerate Alibaba Group (9988.HK) and Tencent (0700.HK) As chipmakers fell on Monday, investors were spooked by new U.S. export control measures aimed at curtailing Beijing’s technological and military advances.
The Biden administration unveiled a sweeping set of export restrictions on Friday, including cutting off China from some semiconductors manufactured anywhere in the world with American equipment.
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Some of the measures will take effect immediately, potentially marking the biggest shift in U.S. policy toward exporting technology to China since the 1990s.
The new rules will have a broader impact, slowing efforts to develop China’s own chip industry and advancing commercial and state research involving military weapons, artificial intelligence, data centers and supercomputers, and many areas powered by high-end chips, experts said.
The new restrictions come at a time when the global chip industry is already facing major headwinds from a post-Covid slump in demand for computers, smartphones and other electronic devices and has warned of weaker earnings.
The most immediate impact will be felt by Chinese chipmakers, they said.
Under the new regulations, U.S. companies must stop supplying Chinese chipmakers with equipment that can produce relatively advanced chips — logic chips under 16 nanometers (nm), DRAM chips under 18 nm and NAND chips with 28 layers or more. license.
This will affect China’s top contract chipmaker – Semiconductor Manufacturing International Corp (SMIC). (0981.HK) and Hua Hong Semiconductor Limited (1347.HK) – as well as state-backed leading memory chipmakers Yangtze Memory Technologies Co Ltd (YMTC) and Changxin Memory Technologies (CXMT).
“These measures will stifle the Chinese chip industry and hamper many growth plans and stifle innovation in both East and West,” said Danny Hewson, analyst at AJ Bell.
“There will be a number of boardrooms holding high-level meetings over the next few days considering the implications of US export restrictions.”
Chinese foundries have a share of the global contract chip market, which is dominated by Taiwan’s TSMC. (2330.TW)But they control 70% of the domestic market, underscoring Beijing’s efforts to increase self-sufficiency in chips.
Analysts said the new regulations will now pose major obstacles to the two Chinese memory chipmakers.
“Memory progress will be limited because there is no opportunity to improve process equipment, there will be no opportunity to expand production, and the market will be lost,” Gu Wenjun, who leads research at ICWise, a Shanghai-based consultancy, wrote in a research note. .
Blocking equipment supplies for high-end chip production could have a cascading effect on simpler chips, analysts said.
For NAND chips, the same equipment used to make 128-layer NAND can make simpler 64-layer NAND, said Stewart Randall, who tracks China’s semiconductor industry at Shanghai-based consultancy Intralink.
China’s Foreign Ministry spokesman Mao Ning said on Saturday that it was an abuse of trade measures designed to strengthen the United States’ “technological supremacy.”
U.S. equipment makers are now required to stop exporting to factories wholly owned by Chinese companies that make advanced logic chips, including KLA Corp. (KLAC.O)Lam Research Corp (LRCX.O) and Applied Materials Inc (AMAT.O).
“This couldn’t come at a worse time as Nvidia is already facing a very challenging period due to supply chain snarl-ups and reduced demand for gaming consoles,” said Susanna Streeter, analyst at Hargreaves Launceston.
Supercomputers, data centers
The rules also include banning the export of a wide range of chips for use in Chinese supercomputing systems used to develop nuclear weapons and other military technology.
Some industry experts say the ban could also hit the commercial data centers of Chinese tech companies. Shares of e-commerce giant Alibaba and social media and gaming giant Tencent, which rely heavily on data centers, were down 3.5% and 2.8%, respectively, by 0805 GMT.
A sharp decline in tech stocks dragged down China’s market in its first Golden Week holiday trade on Monday.
SMIC fell 4.4%, chip equipment maker NAURA Technology Group Co (002371.SZ) The daily range fell 10%, while Hua Hong Semiconductor fell 9.5%.
Shares in AI research firm Sensetime (0020.HK) and surveillance equipment maker Dahua Technology (002236.SZ)This will cut off from chips made using American technologies, falling 5.6% and 10%, respectively.
The impact on tech stocks outside China was limited on Monday as financial markets in South Korea, Japan and Taiwan closed for separate holidays.
Analysts expect the impact to be limited as most of the world’s top contract chipmaker DSMC’s advanced chip orders come from US-based customers such as Apple. (AAPL.O) and Qualcomm (QCOM.O)It generates about 10-12% of its revenue from China.
No significant disruption in the supply of Samsung and SK Hynix devices was expected in South Korea on Saturday (000660.KS) Existing chip manufacturing in China.
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Reporting by Josh Horwitz and Jason Xu; Additional reporting by Anisha Sircar in Bangalore; Written by Myeong Kim; Editing by Muralikumar Anantharaman
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