China’s microchip makers lose $8.6 billion due to new US sanctions
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Shares of the largest semiconductor manufacturers in China at the opening of today’s trading slipped 4-20%. This is how investors reacted to the Friday decision of the Joe Biden administration to tighten restrictions on the export of American technology to China. According to Financial Times, in total, the market capitalization of China’s leading microchip manufacturers decreased by $8.6 billion this morning. So, shares of Semiconductor Manufacturing International, China’s largest semiconductor manufacturer, fell 4% on the Hong Kong stock exchange. Quotes Hua Hong Semiconductor sank 9.4%, while the capitalization of Shanghai Fudan Microelectronics collapsed more than 20%. Shares of Naura Technology, listed on the Shenzhen Stock Exchange, sank by the maximum allowable 10% following the results of trading.
Under a US government decree Friday, US companies and individuals are prohibited from selling semiconductors made with US technology without obtaining an export license. Any trade in semiconductors with Chinese partners must be approved by US authorities. At the same time, the US Department of Commerce on Friday added to the list of “unverified companies” another 31 organizations from China, which are prohibited from buying American technology.
In 2015, the Chinese authorities adopted the Made in China 2025 import substitution program, which, among other things, included initiatives to create new capacities for the production of semiconductors in the PRC, in which the country has a strong lagged behind from Taiwan. After the imposition of sanctions against China by Donald Trump in 2017-2019, the implementation of the program has noticeably intensified. According to the plan, the share of components made in China in Chinese goods by 2025 should be about 70%. The total amount of public investment in the Made in China 2025 program has already reached $1.4 trillion.
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