Latest US chip move harmful to global chain

The United States government's latest move to revoke authorizations that allow three semiconductor companies with operations in China to receive US semiconductor manufacturing equipment will wreak havoc on global semiconductor industrial and supply chains and impede international technological cooperation, said officials and experts.

Chinese chip companies, however, are expected to double down on indigenous innovation and pool more resources into research and development for breakthroughs in key chip technologies, they added.

The US Department of Commerce announced on Friday it was removing Intel Semiconductor (Dalian) Co Ltd, Samsung (China) Semiconductor Co Ltd and SK Hynix Semiconductor (China) Ltd from the validated end-user (VEU) list.

These semiconductor companies had been operating in China under regulations that allowed them to import chipmaking equipment from the US without applying for a new license each time. The revocation means the companies will need to obtain licenses to buy new equipment for use in China.

China's Ministry of Commerce said in a statement on Saturday that it expressed opposition to the US decision to revoke the VEU authorization for the three semiconductor companies operating in China, and urged the US to immediately correct its wrongdoings.

The semiconductor industry is highly globalized, and after decades of development, the sector has evolved into a deeply interdependent ecosystem shaped by both market forces and business decisions, a ministry spokesperson said.

The US move, driven by self-interest, has weaponized export controls and will have a serious negative impact on the stability of global semiconductor industrial and supply chains, said the spokesperson.

The spokesperson added that China called on the US to safeguard the security and stability of global industrial and supply chains. "China will take necessary measures to firmly safeguard the legitimate rights and interests of its enterprises."

Bai Ming, a researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing, said the US decision to revoke VEU authorizations for the three semiconductor companies operating in China will deal a heavy blow to the global semiconductor sector and seriously hurt the interests of tech companies around the world.

Bai said these measures aimed at containing the rise of China's high-tech sector will hinder international technological exchanges and innovation, given China's role as the world's largest chip market and its growing presence in the semiconductor manufacturing segment.

Experts said the decision poses risks for Samsung Electronics and SK Hynix, both of which rely heavily on China for memory chip production. These components are essential for smartphones, laptops and other consumer electronics, many of which are assembled in China.

SK Hynix said in a statement that it would maintain close communication with both the South Korean and US governments and take necessary measures to minimize the impact on business.

Samsung didn't immediately respond to a request for comment.

Washington's tightened export controls will motivate Chinese chip equipment makers to increase investments in R&D, enhance their independent innovation capacities and achieve more technological breakthroughs, said Xiang Ligang, director-general of the Zhongguancun Modern Information Consumer Application Industry Technology Alliance, a telecom industry association.

Chinese tech companies are stepping up efforts to develop homegrown artificial intelligence chips and come up with substitutes for Nvidia's H20 chip.

Alibaba Group has developed a new chip that is more versatile than its older chips and is meant to serve a broader range of AI inference tasks, according to a report from the Wall Street Journal, citing people familiar with the matter.

The chip, now in testing, is manufactured by a Chinese mainland company, in contrast to an earlier Alibaba AI processor that was fabricated by Taiwan Semiconductor Manufacturing Company, the report said, adding that the new chip is interoperable with Nvidia's programming platform. Alibaba was not available for comment.