By Gina Lee
Investing.com – Shanghai-based Semiconductor Manufacturing International Corp (SMIC) saw its Hong Kong shares (HK:0981) slide to four-month lows after the U.S. slapped export restrictions on the Chinese chipmaker.
The shares fell 5.81% to HK$17.50 ($2.26) by 12:44 AM ET (4:44 AM GMT), after sliding as much as 7.9% earlier in the session. SMIC’s Shanghai shares (SS:688981) slumped 6.33% to CNY50.30 ($7.37), its lowest levels since debuting on the bourse in July.
The restrictions mean that U.S. firms will now need to apply for a license to export certain products to SMIC, according to a Sept. 25 letter from the U.S. Commerce Department. The letter also reportedly added that SMIC and its subsidiaries present “an unacceptable risk of diversion to a military end use.”
The restrictions do not put SMIC on the "entry list", meaning that they are not as severe as those imposed on companies that have been placed on the list, such as compatriot Huawei Technologies Co. The restrictions were a compromise between the Commerce and Defence departments and Trump administration moderates, with more severe restrictions, such as those on Huawei, reportedly possible.
SMIC is now the latest Chinese tech company, alongside Huawei, ByteDance Ltd. and Tencent Holdings (OTC:TCEHY) Ltd., to be caught in the crossfire between the U.S. and China.
“The restrictions, once implemented, will severely damage SMIC’s existing and future manufacturing capabilities, and customer trust,” Bernstein analysts led by Mark Li said in a note.
“Without steady supply and service from the U.S., the yield and quality of SMIC’s capacity will degrade, as early as in a few months for more advanced nodes,” the note added.
The company claims that it does not have a relationship with, not manufactures goods for, the Chinese military. SMIC has reportedly not received an official notice of the restrictions, but a formal statement with more details could be released later in the day. There will be a 30-day comment period before the restrictions come into effect. Semiconductor equipment companies and industry groups are expected to express opposition to the restrictions, Citigroup (NYSE:C) analysts, including Atif Malik, said in a note.