While Chinese stock markets were closed last week, the United States imposed sweeping new restrictions targeting major Chinese technology companies. Among other things, there will be restrictions on the export of computer chips developed using US patents or technology.
This also applies to the use of production equipment sold by, among other things, the Dutch ASML. Computer chip manufacturers such as Samsung, Intel, and TSMC rely on ASML lithography machines. As well as Chinese manufacturers. The core production technology is US owned.
TSMC, the world’s largest computer chip maker, fell 7.8 percent during morning trading on the Taipei Stock Exchange. The main index on the Taipei Stock Exchange fell nearly four percent.
It’s a broad decline for tech companies across Asia. This led to a sharp decline in the stock markets.
Market analysis firm Trendforce wrote in a report that this could severely damage US companies – and global supply chains.
Chinese technology leadership
Reaction to the new restrictions came on Monday on China’s stock exchanges. Values of nearly NOK 100 billion have disappeared from International Semiconductor Manufacturer, Hua Hong Semiconductor and Shanghai Fudan Microelectronics. The latter fell by 20.2%.
The US is targeting Chinese strategic industries that include high-tech, Ann Guangyong of the China Mergers and Acquisitions Association tells the South China Morning Post.
Former US President Donald Trump fired the first shots in the trade and technology war with China. Initially, the launch was geared towards Huawei and the company’s 5G ambitions. Before the weekend, another 31 companies had been blacklisted in the United States by Joe Biden.
The United States will never back down from this, broker Andy Maynard at China brokerage China Renassance tells the Financial Times.
Among the new Chinese companies on the list is Shenzhen DJI Technology, which has become the world’s largest producer of drones. The United States believes that DJI has close ties with the Chinese military. DJI strongly refutes this.
All these sanctions are doing is getting more companies to completely abandon cooperation with the United States, and instead build a new ecosystem where the United States is not a part of, Director Lu Chuanying at the Shanghai Institute of International Studies tells the South China Morning Post.
– Undo log
International financial institutions and research firms covering the global technology sector agree on what this will mean.
“Not only will this be negative for China’s semiconductor industry, but it will also indirectly affect business opportunities for global semiconductor manufacturers in the long run,” Citigrop wrote in a new report.
The Philadelphia Stock Exchange’s semiconductor index, which includes the 30 largest US computer chip companies, fell 3.5 percent Monday. On Friday, the index fell more than 6 percent. Graphics card manufacturer Nvidia is down 61 percent this year.
– This represents an additional escalation. We don’t know what China can do in response. Possible retaliation remains a risk, writes analyst Stacy Rasgon at Bernstein Financial Corporation, according to Bloomberg.
The global tech sector had a miserable quarter behind. South Korea’s Samsung reached an earnings announcement last week. According to a new report from analysis firm Canalys, global PC sales fell 18 percent in the third quarter. Only Apple saw weak growth.
After a decline in the first half of the year, the PC market has posted a record decline compared to last year, chief analyst Ishan Dutt says in a comment.
A big setback for China
Soon after Xi Jinping became the leader of China and consolidated its power, he began making long-term strategic plans. “Made in China 2025” should make China a world leader in select areas – including 5G, artificial intelligence and computer chips.
The goal was to become less dependent on foreign technology, patents and components.
In five days, the CPC will open the 20th Party Congress. Xi is likely to remain in office for as long as he himself desires. He would be much freer to devise a new long-term economic strategy for China until 2049.
These restrictions from the United States constitute a major setback for China. It’s bad news for the global semiconductor sector, analyst David Wong at Japanese financial institution Nomura wrote in a new report.
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