Shares of SMIC experienced a significant decline on Friday, triggering a broader downturn among major Chinese technology companies. This occurred following indications from the Biden administration suggesting that China’s largest chipmaker might have violated U.S. export restrictions to develop a new chip for a flagship Huawei phone.
During a congressional hearing on Thursday, a senior U.S. Commerce Department official hinted that SMIC, officially known as Semiconductor Manufacturing International Corp, may have illicitly acquired U.S. chipmaking technology for chip production. However, investigations into the matter are still ongoing.
These remarks fueled renewed uncertainty regarding potential further restrictions on Chinese companies, echoing the trend that has been steadily gaining momentum. This comes alongside calls from government officials to ban popular social media app TikTok.
The Biden administration had previously tightened export controls on Chinese chipmakers in 2022 and 2023, with the latest round of restrictions enforced in mid-2023 aimed at limiting China's access to advancements in artificial intelligence. Notably, NVIDIA Corporation is no longer permitted to sell its most advanced chips in China.
Huawei remains a contentious issue for U.S. lawmakers, especially following its blacklisting in 2019 due to alleged ties to the Chinese military. Similar actions were taken against SMIC in 2020, although both companies have denied such associations.
The anxiety surrounding SMIC led to a decline of over 5% in its shares during Hong Kong trading. Similarly, Shanghai Fudan Microelectronics Group Co Ltd and Hua Hong Semiconductor Ltd saw drops of more than 3% each.
These losses extended to other chipmakers and broader technology stocks, with internet giants Alibaba, Baidu, and Tencent Holdings experiencing losses ranging from 2% to 4%.
The negative sentiment also impacted broader market indices, with Hong Kong’s Hang Seng index plummeting by 2.9%. Mainland-listed tech firms saw declines as well, with China’s Shanghai Shenzhen CSI 300 and Shanghai Composite sliding by more than 1.4% each.
However, the potential for further U.S. actions against SMIC could present opportunities for other China-based chipmakers. These companies might step in to address a potential supply gap in the Chinese semiconductor market.
NAURA Technology Group Co Ltd and Hygon Information Technology Co Ltd emerged as potential beneficiaries, with their shares rising by 4.2% and 0.1% respectively on Friday.
Paraphrasing text from "Investing" all rights reserved by the original author.
