China’s Chips Stocks Hammered By White House Sanctions

The semiconductor cold war is intensifying. 

After the sanctions announced last week by the White House, stock prices of several Chinese chip companies were battered on Monday (October 10 with some companies losing as much as 20 per cent of their value.

The new sanctions include curbs on tech exports thus blocking access to core technologies. 

The U.S. added China's top memory chipmaker YMTC and thirty other Chinese entities to a so-called "unverified" trade list. 

Twenty-eight companies were added to the "entity list", including several provincial arms of China's National Computer Center, the Beijing Institute of Technology and Beijing SenseTime Technology Development, a subsidiary of a major Chinese A.I. company.

These firms will now be subject to government licensing and sanctions requirements.

Naura Technology Group, a leading domestic chip equipment producer, closed 10 per cent down. Hwatsing Technology group was down by more than 17 per cent.

AMEC or Advanced Micro-Fabrication Equipment (AMEC) was down by almost 20 per cent. Anji Microelectronics, a group focussed on chipmaking chemicals, was down 20 per cent.

Hangzhou Changchuan Technology Group was also 20 per cent down, indicating the bearish sentiments following the sanctions. 

The big blow comes from the new approval mechanism where companies in the United States will have to obtain a license to export parts and components that could aid the chipmaking sector in China.

Both American citizens and permanent residents will now have to obtain licenses to work for Chinese companies engaged in the semiconductor industry.

The new rules also restrict TSMC and Samsung from providing support to Chinese companies.

Semiconductor Manufacturing International Corporation, China’s crowning jewel in the semiconductor industry lost 4 per cent, Hua Hong Semiconductor lost 9.4 per cent of its value and Shanghai Fudan Microelectronics was down by over 20 per cent. In totality, the sector lost $8.6 billion in market value. 

The White House, since the ushering of the CHIPS and Science Act, has been upping the ante against China.

The $280 billion CHIPS and Science legislation comes with $52 billion for the semiconductor industry in America and also ushers $200 billion in scientific research in artificial intelligence, quantum computing, and other relevant technologies.

The $52 billion CHIPS funding subsidises companies building fabs or production plants within the United States. Also, it sets aside billions of dollars for building a semiconductor ecosystem with elaborate research and development facilities and a thriving workforce. Companies building fabs will also be eligible for tax credits.