China chip stocks fall as Biden expands tech curbs

(Bloomberg) – Chinese semiconductor stocks tumbled after new U.S. restrictions on China’s access to U.S. technology added to a disappointing start to the earnings season, fueling fears that the slowdown in industry is far from over.

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Bellwether Semiconductor Manufacturing International Corp. fell 5.2% in Hong Kong on Monday, the most since Aug. 15. market data bolstered expectations of a more aggressive interest rate hike by the Federal Reserve.

Hua Hong Semiconductor Ltd. plunged 10% in Hong Kong, while Shanghai Fudan Microelectronics Group Co. fell 25%, the most in seven years. Will Semiconductor Co. and Maxscend Microelectronics Co. fell more than 6% each in mainland trading.

The US measures include export restrictions on certain types of chips used in artificial intelligence and supercomputing, as well as stricter rules on the sale of semiconductor equipment to any Chinese company. Separately, the United States has also added more Chinese companies to a list of companies it considers “unverified”, which means that American suppliers will face new obstacles to selling technologies to these entities. .

The restrictions are a “big setback for China” and “bad news” for global semiconductors, Nomura Holdings Inc. analyst David Wong wrote in a note. China’s localization efforts could also be “at risk as it may not be able to use advanced smelters in Taiwan and Korea”, he wrote.

The new US rules come at a time when the chip industry is already grappling with a worrying start to the earnings season and has gone from a global chip shortage to a glut in a matter of months due to the toothy nature of application saw for semiconductors.

Samsung Electronics Co., the world’s largest memory chip maker, and PC processor maker Advanced Micro Devices Inc. announced results last week suggesting a deeper-than-expected downturn.

Chinese Foreign Ministry spokesman Mao Ning said on Saturday that the measures, which are due to take effect this month, are unfair and “will also harm the interests of American businesses”. They are “dealing a blow to global industrial and supply chains and to global economic recovery”, she said.

Among other stocks, Naura Technology Group Co. fell from the 10% daily limit in mainland trading, while Advanced Micro-Fabrication Equipment Inc. and ACM Research Shanghai Inc. fell more than 16% each. .

The U.S. Commerce Department has added Beijing Naura Magnetoelectric Technology Co., a subsidiary of Naura, to its unverified list, the company said in a filing.

“It was added to the UVL because it supplies equipment to AVIC International Holdings and is therefore considered to have military business exposure,” Citigroup Inc. analysts, including Jamie Wang, wrote in a note, referring to Naura.

To be sure, heightened Sino-US tensions could prompt Beijing to bolster its support for local businesses in a bid to achieve its goal of becoming an independent chip powerhouse.

“It is possible that these latest actions will spur efforts to build more advanced logic manufacturing and advanced WFE capabilities in China,” Jefferies Financial Group Inc. analysts, including Edison Lee, wrote in a note. .

Chinese chip stocks could anchor the sector globally on Monday as markets in Japan, South Korea, Taiwan and Malaysia are closed.

The broader Chinese stock market also saw declines as it returned from the Golden Week holiday, hurt by a selloff in global equities and dismal holiday spending data that heightened worries about an economic recovery.

Chinese stocks slide as traders return from Golden Week holiday

(Updates with comment and context from Citigroup.)

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