The U.S. expanded restrictions on chip exports to China, causing shares of Chinese companies, including SMIC, Alibaba and Tencent, to plummet
Shares of Chinese companies collapsed after the opening of trading amid a new package of restrictions on exports of semiconductors to China.
Here's What We Know
The White House announced a new package of sanctions on Friday, October 7. The Joe Biden administration has expanded restrictions on the supply of chips for microcomputers. Now each manufacturer must prove that its products cannot be used by China for military purposes. In the absence of appropriate evidence companies will be permanently banned from supplying chips to the Celestial Empire.
Thus, the United States will exclude the possibility of U.S. technology reaching the Chinese military, even through third countries. Now 31 companies are under suspicion, but their names have not yet been disclosed. But it is known that all of them are registered in China.
Each company will be forced to undergo export control and indicate the scope of end use of the products, which are of American origin. In case of insufficient weighty arguments the company will go to the "black list", and in order to obtain products in the future it will have to obtain a special license from the U.S. Department of Commerce.
Since the expanded restrictions were announced only on Friday, the market reacted to the White House's decision only three days later. Shares of NAURA Technology Group, a manufacturer of semiconductor manufacturing equipment, fell 10%. Hua Hong Semiconductor's stock fell 9.5%. Leading contract chip maker Semiconductor Manufacturing International Corp (SMIC) suffered less. Its shares became cheaper by 3.8%. Memory suppliers Yangtze Memory Technologies Co Ltd (YMTC) and Changxin Memory Technologies (CXMT) also suffered.
The effect of the sanctions was also felt by companies whose core business is not directly related to semiconductor products. For example, shares of Alibaba and Tencent fell by 3.3% and 1.7%, respectively, as both companies depend on data centers.
The securities of Sensetime, an artificial intelligence research company, fell 4.5%. Shares of Dahua Technology are now 10% cheaper. The company makes video surveillance equipment.
