Written by Eduardo Baptista and Heikung Yang
BEIJING/SEOUL (Reuters) – Chinese chip companies targeted by Washington with new export controls have pledged to accelerate the localization of their supply chain and said they will be able to continue production thanks to recent efforts to build stockpiles of equipment.
The latest restrictions, the third US crackdown on the Chinese sector in three years, focused on chipmaking equipment, software and high-bandwidth memory. It restricts exports to 140 companies, including chip equipment maker Naura Technology Group and ACM Research.
Empyrean, a maker of electronic design automation (EDA) tools also known as Beijing Huada Jiutian Technology, said its inclusion on the list would have little impact on operations.
“The company will seize the development opportunity to accelerate the localization of full-process EDA tools,” it said in a statement to the stock market.
Jiangsu Nata Opto-Electronic Material, which makes the materials used to make chips, told Chinese news outlet Yicai that it had stocked them and would also make replacements locally, but did not provide details.
Other companies, such as semiconductor testing systems provider Beijing Huafeng Test & Control Technology, said they had already localized their entire supply chain, the 21st Century Business Herald reported.
While Chinese authorities described the move as “economic coercion,” the measures appeared to have had little impact on chipmaker stocks, which rose slightly on Tuesday as analysts said the restrictions were less stringent than feared.
Controllable disorder
Martin Rasser, managing director at Datena, a data intelligence platform focused on Chinese technology, said the US restrictions target the “weakest point” of China’s semiconductor industry, which relies heavily on foreign equipment for manufacturing.
Chinese chip industry capital spending next year is likely to fall by $10 billion, or about 30% year over year, to $35 billion, as a result of these restrictions, Jefferies analysts said in a note.
But other analysts said the restrictions may not have the desired effect, as Chinese chip companies have since last year ramped up purchases of foreign-made equipment from the likes of Dutch lithography machinery maker ASML and US tool maker Lam Research.
In the first nine months of this year, China’s imports of semiconductor equipment increased by a third to $24.12 billion, according to Chinese customs data.
“This was as close to a continuation of the status quo in that it makes things very difficult for leading manufacturers, but it will not stall that progress any more than current regulations,” said Jeff Koch, an analyst at Bank. Semi-analytical research group.
Exclude CXMT
The exclusion from the Entity List of ChangXin Memory Technologies (CXMT), a leading Chinese manufacturer of key components in artificial intelligence chips, has surprised some.
The Biden administration says the restrictions are intended to limit China’s ability to access and produce chips that develop artificial intelligence for military applications or threaten U.S. national security.
Shares of some South Korean equipment suppliers to CXMT rose on Tuesday after being disqualified. CXMT did not immediately respond to a request for comment.
“This development has brought short-term relief to South Korea’s chip sector, as its China-bound revenues are unlikely to be significantly affected for the time being,” said Ryu Young-ho, an analyst at NH Investment & Securities. Shares of Jusung Engineering, a CXMT supplier, rose 7.7% in morning trading, after falling nearly 7% in the previous session amid concerns about pending restrictions. Mirae Corp, a South Korean chip equipment maker that received about 15% of its total revenue from CXMT in the first half of this year, has signed supply deals worth 9 billion won ($6.41 million) with CXMT this year so far. Its shares rose 1.4% in morning trading, continuing its 7% gain in the previous session.
($1 = 1,403.3800 won)
(Reporting by Eduardo Baptista in Beijing and Heikung Yang in Seoul; Additional reporting from the Beijing newsroom; Writing by Brenda Goh; Editing by Sam Holmes)