By Eduardo Baptista and Heekyong Yang
BEIJING/SEOUL (Reuters) – Faced with fresh export restrictions from the U.S., Chinese chip manufacturers have announced plans to speed up the localization of their supply chains and remain confident about continuing production, thanks largely to efforts they’ve made in accumulating equipment stocks.
This recent crackdown marks the third instance in as many years that the U.S. has tightened its grip on China’s chip sector, with measures now targeting essential elements like chipmaking machinery, software, and high-bandwidth memory. The restrictions impact 140 companies, prominently including Naura Technology Group and ACM Research, both known for manufacturing chip equipment.
Empyrean, recognized in the industry as Beijing Huada Jiutian Technology, produces electronic design automation tools and stated that its operations would remain largely unaffected by its listing among the restricted entities.
“The company views this as an opportunity to fast-track the localization process of our comprehensive EDA tools,” they noted in their statement to the stock market.
Jiangsu Nata Opto-Electronic Material, a key player in the chipmaking materials industry, revealed to Chinese media outlet Yicai that it has sufficiently stocked supplies and plans to substitute imports with domestic products, though details on these substitutions remain sparse.
Meanwhile, firms like Beijing Huafeng Test & Control Technology, which specializes in semiconductor test systems, claimed they have already achieved full supply chain localization, as reported by 21st Century Business Herald.
Despite the Chinese government’s denouncement of these measures as “economic coercion,” the impact on chip stock prices appears minimal. In fact, share prices experienced a slight uptick on Tuesday, mainly because the measures were perceived by analysts to be less harsh than initially anticipated.
MANAGEABLE DISRUPTION
Washington’s latest actions primarily target a vulnerable aspect of China’s semiconductor industry, one that heavily relies on imported equipment for its manufacturing processes, according to Martijn Rasser, managing director at technology-focused intelligence firm Datenna.
As a consequence of these new restrictions, analysts at Jefferies predict a 30% drop in capital expenditure for China’s chip industry next year, estimating a fall to $35 billion.
Nevertheless, some analysts argue that China’s chip manufacturers had already been countering such limitations by bolstering international equipment purchases. China reportedly increased its semiconductor equipment imports by a third, reaching $24.12 billion in the first nine months this year, data from China Customs reveals.
Jeff Koch from research group SemiAnalysis remarked, “While the new regulations make life tougher for leading-edge manufacturers, they’re not going to disrupt industry progress any more than existing rules have.”
The Story Continues
CXMT EXCLUSION
Curiously, ChangXin Memory Technologies (CXMT), a prominent player in AI chip production within China, is not on the exclusion list, sparking some surprise.
According to the Biden administration, the overarching goal of these restrictions is to curb China’s potential to leverage AI chips for military advancements or activities that could compromise U.S. national security.
Following the news of CXMT’s exemption, South Korean suppliers to the company experienced a market boost, with CXMT leaving no immediate response to this development.
Ryu Young-ho, an analyst at NH Investment & Securities, noted, “This development has provided temporary relief to South Korea’s chip industry, with their revenue tied to China remaining relatively unthreatened for now.” Shares of Jusung Engineering, a supplier for CXMT, rose by 7.7% during morning trade after experiencing a fall of nearly 7% in the previous session amid ongoing restriction concerns.
Mirae Corp, another South Korean chip equipment manufacturer deriving about a fifth of its revenue from CXMT, recorded supply deals worth 9 billion won ($6.41 million) with CXMT recently, seeing their shares climb 1.4%, building on a previous day’s 7% rise.
($1 = 1,403.3800 won)
(Reporting by Eduardo Baptista in Beijing and Heekyong Yang in Seoul; Additional reporting by Beijing newsroom; Writing by Brenda Goh; Editing by Sam Holmes)
