Shares in Shanghai Semiconductor Manufacturing International (SMIC), a giant in the Chinese semiconductor industry, just saw the biggest drop in seven weeks. The cause of the collapse stems from a report that the Trump administration is considering blacklisting SMIC in the context of increasing pressure on Chinese technology businesses.
Specifically, SMIC shares fell nearly 20 in the early morning session of September 7 in Hong Kong time. As of 10am Hanoi time, the price of this stock was 19.24 Hong Kong dollars, down 18.56% from the previous trading session. In morning trading, the stock fell to HK $ 18.98 at times.
The sell-off comes as the US Department of Defense is working with stakeholders to decide to make a ruling on the fate of SMIC. If Chinese companies are blacklisted, US businesses must obtain a special license to continue doing business with the giant in the Chinese semiconductor industry.
The US side believes that SMIC has ties to the Chinese military, which keeps it under surveillance. However, SMIC itself claims that it has no relationship with the Chinese military and that their products are intended for civilian and commercial use only.
However, with the catastrophic collapse, SMIC became the latest victim of the Trump Administration. Previously, Chinese technology companies, most notably Huawei, were banned from the US amid growing tensions between the world’s two largest economies. The US and China contradict each other on a wide range of issues, from trade to the Covid-19 pandemic to regional and global geopolitical issues.
If the US really blacklisted SMICs, it would be the next critical blow against China. SMIC will likely follow in Huawei’s footsteps in being deprived of access to US technologies and equipment.
“If it is blacklisted, it will seriously impair SMIC’s ability to improve technology because American devices are indispensable for the modern semiconductor research, development and production process. Such a limitation, once becoming a reality, would quickly allow the US to limit SMIC’s ability to effectively advance technology.“, Said Mark Li, an analyst at Bernstein.
In contrast to SMIC’s disastrous drop, shares of rival companies, including United Microelectronics Corp. and Vanguard International Semiconductor Corp., which jumped 9 percent during the same period in Taipei, Taiwan, China.
In response to increasingly aggressive US activities, China is planning to increase support for the so-called “3rd generation semiconductors“In its next five-year plan. Beijing wants to be able to produce its own chips domestically. This is an indispensable component in a series of modern industries, such as 5G, military radar or vehicles.” electricity….
Currently, the most advanced chip manufacturing technology is still completely under the control of the US Government. Countries that cannot find any alternatives in the near future depend on the US.