WSJ
Shares in China’s Top Chip Maker Tumble as U.S. Weighs Export Controls
SMIC could be added to the Commerce Department’s ‘entity list,’ making exports to the company difficult
The Shanghai skyline on Aug. 28. Semiconductor Manufacturing International Corp. is based in the city and recently carried out a second listing there.
PHOTO: KEVIN FRAYER/GETTY IMAGES
By
Updated Sept. 7, 2020 5:15 am ET
Stock in China’s top semiconductor manufacturer fell sharply after the U.S. government said it was considering placing export restrictions on the company, in what would mark a major escalation in the Trump administration’s crackdown on Chinese technology companies.
Shares in Semiconductor Manufacturing International Corp., which is China’s most advanced chip maker, fell nearly 23% to a more than three-month low in Hong Kong on Monday. In Shanghai, where the company recently raised billions of dollars through a second listing to boost its production capacity, SMIC shares fell more than 11%.
The Trump administration could add SMIC to the Commerce Department’s “entity list,” as U.S. officials did recently with Chinese telecom-equipment maker Huawei Technologies Co. That would require companies to go through a difficult layer of review before exporting any U.S. technology to SMIC.
Like all chip makers, SMIC is highly dependent on U.S. equipment and software, Citigroup analysts led by Roland Shu wrote in a note to clients, adding: “We would expect SMIC production line expansion and upgrades to largely cease if SMIC is added to the entity list.”
SMIC competitors such as Taiwan Semiconductor Manufacturing Co.and United Microelectronics Corp. could eventually gain market share, Mr. Shu added. However, he said any U.S. restrictions on SMIC could damage the broader industry in unpredictable ways, “as business relationships between China and U.S. companies become disrupted.”
Other Chinese chip companies also dropped. Hua Hong Semiconductor Ltd., a smaller Chinese rival to SMIC, fell more than 14% in Hong Kong. A Wind index of semiconductor stocks listed on mainland Chinese markets retreated 4%, underperforming a 1.9% drop in the benchmark Shanghai Composite.
Jefferies analysts led by Edison Lee said the potential export ban was a “lose-lose proposition” that would be bad news both for Chinese semiconductor companies and the global semiconductor production equipment (SPE) industry.
The Jefferies team estimates China’s planned semiconductor plants will require $36 billion of capital expenditure on equipment, and China could make up 24% of global SPE procurement this year.
SMIC stock has soared in recent months, as investors have piled into a company seen as strategically important to China. Despite Monday’s selloff, the shares are still up 53% this year.
|
