The Chinese chip manufacturer Semiconductor Manufacturing International Corp. (SMIC) has been accused by the USA of 'possibly' violating US law or applicable sanctions because it produces 7 nm processors for the telecommunications giant Huawei. SMIC was founded around 20 years ago with state aid and, like its Taiwanese role model TSMC, manufactures for fabless developers as a foundry.
The accusation was made by Alan Estevez, Assistant U.S. Secretary of Commerce for Industry and Security, during his recent testimony before the U.S. Foreign Affairs Committee a few weeks ago. Estevez was vague about whether an investigation into the matter was actually underway. He did, however, point out that the Chinese chipmaker's 7nm process, which lags several structural generations behind current TMSC technology, has not been found to produce efficient yields. He echoed earlier comments by US trade representatives who questioned China's ability to produce advanced chips on a large scale and at a demand-driven and economically viable yield.
As head of the Bureau of Industry and Security, Estevez is responsible for the chip export controls and sanctions that the Biden administration is using to keep China's semiconductor ambitions away from the manufacturing technologies of American companies and the advanced chips they can produce. The performance of SMIC shares on the Hong Kong stock exchange following the statement by the senior government representative shows that this is not just a minor issue in the tough trade war between China and the USA: they fell by 5.5%, as industry observers from Bloomberg reported.
However, the risk of being sanctioned like Huawei and thus excluded from important international markets would be much more serious for SMIC than the temporary slump in its share price. The situation is double-edged for both sides: the Chinese chip manufacturer will succeed in its technological development - even if it is slowed down and, in the worst case, excluded from Western markets. This is also a case of typical American 'buying time': keeping the newcomer at a distance will give the island of Taiwan and its semiconductor industry, the functioning of which is also in China's interests, a few more rounds of peace before the one-China doctrine is powerfully enforced.
