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SMIC in the firing line

SMIC, China’s biggest chipmaker, is facing potential US sanctions in an escalation of the on-going trade clash between the US and China.

According to reports coming out of Washington the Department of Defense, in a move replicating the decision to ban Huawei, could be about to block US companies from providing goods and services to the company. This would not only escalate the trade spat between the two but, critically, undermine China’s attempts to develop a self-sufficient semiconductor industry.

The US is said to be investigating suggestions that SMIC has close relations with the Chinese military, which the company denies.

Some analysts have suggested that should these sanctions be imposed then there’s a good chance the business could ‘go under’ within a matter of years.

SMIC, a direct competitor of TSMC, was founded 20 years ago. It recently introduced capacity for chips at 14nm, which means it is around two generations behind TSMC, and despite significant state support remains far behind its rival in terms of volumes, technology and efficiency.

SMIC relies heavily on a number of US companies for production equipment and any sanctions would be a severe blow to its long term survival. Sanctions could also impact Japanese and Dutch suppliers to SMIC as well.

US sanctions have had a massive impact on Huawei, with its successful chip division now struggling. Could the same thing be about to happen to SMIC?

Author
Neil Tyler

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