Chinese semiconductor firms bear heavy fallout of US chip sanction

Since the US issued one of the broadest export controls on semiconductor technology to China in a decade last Friday, China’s semiconductor industry has seen its market value tumble for days in a row. At least 13 China-listed semiconductor firms saw market value decline more than 10% since Monday, and five saw a more than 20% decline. 

Issued by the US commerce department, the comprehensive restriction bars companies from shipping advanced chips and chipmaking tools to China unless they obtain a special license. More specifically, the restrictions aim to cut off China’s access to and ability to make advanced chips under 16nm or 14nm, DRAM memory chips of 18nm or more advanced, and NAND flash memory chips of 128 layers or more. Those technologies are essential to supercomputing and artificial intelligence. 

The Biden Administration cites China’s advances in military systems as part of the reasons for the measure. In mid-September, US National Security Advisor Jake Sullivan emphasized the importance of “preserving our edge in science and technology” at a speech and said the US must “maintain as large of a lead as possible” on certain technologies like “advanced logic and memory chips.”

A day after the US issued the restriction, China’s foreign ministry spokesperson Mao Ning said the measure “runs counter to the principle of fair competition and international trade rules” and “deal a blow to global industrial and supply chains and world economic recovery” at a press conference. China Semiconductor Industry Association (CSIA) made an announcement on Thursday, saying they are “troubled with applying the concept of national security and foreign policy interest to each action of the discriminating trade policy.”

To assess the immediate damage of the US’s measure, TechNode selected five Chinese semiconductor firms that took a major hit, including three chipmakers, a chip gear vendor, and a server provider.

READ MORE: The US’s moves to contain China’s semiconductor industry: a timeline from July

Storage chip maker Yangtze Memory Technologies (YMTC)

• Major Chinese memory chip maker YMTC saw its essential US suppliers, KLA and Lam Research, withdrawing supporting units, according to the Wall Street Journal and Chinese media outlet Caixin. The two suppliers have paused support for the installed equipment, sources told Wall Street Journal.
• Applied Materials, a chipmaking equipment supplier of YMTC, which generated 27% of its sales from China in the second quarter of this year, said it was applying for export licenses.
• YMTC managed to ship 128-layer storage chips last year and just released more advanced chips this year that could be built with 232-layer tech, according to Chinese state media Global Times.
• Founded in 2016, YMTC is a state-owned firm with major funding from China’s semiconductor “Big Fund.”

Server vendor Sugon

• Sugon, a major Chinese high-performance computing servers vendor, has been on the US Entity List since 2019 and is one of the 28 entities affected by the new bans.
• Under the new ban, chips with a processing performance of 4,800 or above TOPS will be restricted. The firm has turned to AMD for authorized chips due to the previous CPU ban, which could be cut off by the new ban, according to a Wednesday report from TrendForce, a Taiwan-headquartered intelligence provider. The report also mentioned that major Korean memory chip providers Samsung and SK Hynix have stopped supplying to the firm, which is also important for machine learning.
• The firm’s history can be traced back to 1993, when its first computing system, Shuguang-1, came out. In 2019, the firm has launched servers with domestic Loongson chips in 2019. Its stock price has shrunk by 38.4% from the peak in August to its lowest point the day after the new bans were released, with stock price recovering slightly as of Tuesday.

Chip manufacturer SMIC 

• Semiconductor Manufacturing International Corporation (SMIC), a major Chinese chip maker, was previously banned from acquiring chipmaking tools for 14 nm or more advanced ones.
• The new measure now expanded the ban to 16 nm, a mature tech node, which could slow down SMIC’s strong growth.
• “SMIC’s revenue could grow at a 50% slower pace vs. our expectations in 2023 on the US’s stricter equipment export license requirements, as 48% of its new capacity to be installed by next year is in 28- or smaller nanometer node advanced chip manufacturing,” analyst Charles Shum told Bloomberg.
• The firm has seen a 10.8% stock price decline since Monday.

Memory maker CXMT

• ChangXin Memory Technologies (CXMT) is a major Chinese dynamic random-access memory (DRAM) maker that has shipped double data rate 4 (DDR4) chips built with 19 nm tech.
• The firm planned to make 17 nm DDR5 samples in the second quarter of this year, according to DigiTimes. Such a plan could be hobbled by the new measure, which bans export to Chinese facilities that make DRAM chips below 18 nm. As a result, CXMT may be unable to obtain new chipmaking tools.
• Similar to YMTC, CXMT is the “hope” of China’s memory chips as it managed to ship mid-end memory chips for devices like smartphones, watches, VR headsets, and servers, according to its product list.
• The firm’s stock saw over a 20% fall within a month. Since Monday, its stock price is down 9%.

Chipmaking equipment vendor AMEC

• Advanced Micro-Fabrication Equipment China (AMEC), a major equipment vendor for chipmaking, could also take a hit from the ban as it doesn’t allow “US persons” to support development or production.
• Gerald Yin, founding chairman and CEO of the firm, as well as many senior executives of the firm, are US citizens, according to Nikkei Asia. These people meet the ban criteria mentioned above and might need to leave the firm.
• AMEC’s stock prices have fallen by 26% since the release of the new bans.
• Founded in 2004 in Shanghai, AMEC has seen a focus in etch tech and shipped dielectric etch for producing 7 nm chips in 2016, according to its website.
• Another local rival, Naura, is also stuck in a similar situation, as the firm has informed US employees to stop taking part in component and machinery development, according to SCMP.