A worker at a potato chips factory in Chongqing, China, March 30, 2022.
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The United States said it would grant a temporary license from October 21 to April next year to allow companies to manufacture some of the high-tech products in China for use outside the country.
Chinese token stocks fall
China’s biggest chipmaker, Semiconductor Manufacturing International Corporation, fell 3% on Monday afternoon in Hong Kong amid a market sell-off.
Hua Hong Semiconductor fell about 9%, while Shanghai Fudan Microelectronics plunged more than 20% on Monday afternoon.
US chipmaker stocks Nvidia and AMD fell in Friday’s trading session as concerns over falling demand dragged the sector lower.
“The United States has abused export controls to wantonly block and hinder Chinese companies,” Chinese Foreign Ministry spokesman Mao Ning said in a weekend briefing. according to an official transcript in English.
“Such a practice goes against the principle of fair competition and the rules of international trade,” she said. “It will not only harm the legitimate rights and interests of Chinese companies, but also the interests of American companies.”
Mao did not mention any Chinese countermeasures plan.
The global semiconductor supply chain is highly specialized. Only a few companies have the most advanced technology, while China is investing heavily in domestic players to try to catch up.
Taiwan semiconductor manufacturing company dominates the manufacturing capacity of the world’s most advanced semiconductors. ASML, based in the Netherlands, is the only company in the world capable of manufacturing the very complex machines needed to produce the most advanced chips.
On the other hand, US companies such as Lam Research, KLA, and Applied Materials are industry leaders for other tools needed for chip manufacturing.
Assess the damage
It remains to be seen how damaging the new US restrictions will be to businesses.
The US government previously placed Chinese firms Huawei and SMIC on a blacklist that required vendors to obtain a license before selling to them.
But suppliers to both companies were granted licenses to do billions of dollars in business last year, according to Reuters.
The US Bureau of Industry and Security has estimated that the latest rule changes mean it will receive at least 1,600 additional new license applications per year.
International cooperation is also needed, a senior US government official said at a briefing on Thursday, Reuters reported.
“We recognize that the unilateral controls we put in place will lose their effectiveness over time if other countries do not join us,” the official said in the report. “And we risk undermining American technological leadership if foreign competitors are not subject to similar controls.”
The US Embassy in Beijing did not immediately respond to a CNBC request for comment on the report.