SMIC shares up 23% on fears that US may approve China’s chipmaker

According to Reuters and other news outlets, the US Department of Defense and other US agencies are reportedly considering a ban on exports to Semiconductor Manufacturing International Corp. Chipmakers can be added to a list of companies that the US government considers weak to American interests.

According to a Reuters report, SMIC’s relationship with the Chinese military is under investigation, with an unnamed American official and two former officials briefed on the case. The decline in SMIC stock ended the market value of $ 31 billion ($ 4 billion).

American inventory companies face significant challenges in acquiring critical technology because American firms are banned from selling them without first obtaining a license to do so. For example, by increasing the ban on Chinese tech firm Huawei, which was added to the list last year, for example, threatening to cripple its global business.

The Department of Defense declined to comment on the reports. China’s largest semiconductor manufacturer SMIC said on Monday that it was “in complete shock”.

“The company manufactures semiconductors and only provides services for civil and commercial users and end use,” SMIC said in a statement to the Hong Kong Stock Exchange. “We have nothing to do with the Chinese military.”

SMIC said it is “open to honest and transparent communication with US government agencies” in hopes of clearing up potential misconceptions. ”

The ban against SMIC will be the latest step in the ongoing battle between Washington and Beijing that governs future technologies.

In recent weeks, President Donald Trump has threatened to ban popular Chinese apps such as TicketLock, which is owned by ByteDance and WeChat. Tencent (TCEHY), From operations in the United States. He has ordered ByteDance to sell TitTalk and suggested that the Treasury Department should cut the deal. China responded by introducing new rules that Beijing could veto any such deal.
In May, Washington restricted Huawei’s chip design company ability to work with Taiwanese firm TSMC, the world’s largest contract manufacturer of semiconductors. Last month, it further reduced Huawei’s reach for other chipmaking companies. Most major semiconductor manufacturing companies, including TSMC and SMIC, rely on American machines and technology. Beijing pushed back the sanctions, marking the United States as a “bully” who is abusing national power.
New sanctions include fatal blow & # 39;  For Huawei.  China forbids America from bullying

Sanctions on SMIC will push China’s ambitious ambitions. The country wants to build a state-of-the-art semiconductor manufacturing industry, but it takes a lot of time and a lot of money.

Eurasia Group’s head of geotechnology Paul Triolo wrote in a note last week that adding SMIC to the trade blacklist would be “a significant new impediment to China’s semiconductor development”.

According to Triolo, China has invested more than $ 200 billion to try to develop the country’s chip manufacturing industry faster and more advanced semiconductors.

“So far it has achieved limited results,” he said, adding that SMIC is three to five years behind the industry leaders. Intel (INTC), Samsung (SSNLF), And TSMC (TSM). “

The global supply chain of semiconductors means that sanctions against Chinese companies often harm American companies as well.

Approving SMIC, for example, would “further reduce the revenues of American semiconductor manufacturing equipment companies, which supply Chinese manufacturers, to resell and reorganize available funds.” [research and development] Tricol said later generations of semiconductors and related manufacturing equipment are necessary to develop.

China is investing billions in chipmaking to close the gap with its global rivals

In July, SMIC raised nearly $ 7 billion in a secondary listing on China’s response to the Nasdaq, Shanghai’s star market. The shares popped up more than 200% in its Shanghai debut, indicating that Chinese investors were eager to buy the country’s major chipmaker.

On Monday, SMIC shares were shared both in Hong Kong, where they fell nearly 23% and in Shanghai, where they fell more than 11%.

The shares of SMIC traded in Hong Kong are still over 50% for the year. TSMC shares closed down 0.7% in Taiwan. Samsung stock rose 1.6% in Seoul.