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Shares in SMIC, China’s largest contract chipmaker, tumbled on Thursday after two US congressmen urged the White House to further restrict export sales to the company.

The comments came after Huawei Technologies unveiled the Mate 60 Pro, a Chinese smartphone with an advanced chip believed to be made by SMIC.

Last week’s launch shocked industry experts, who failed to understand how Shanghai-headquartered SMIC would be able to make such a chip after the United States’ sweeping effort to restrict China’s access to foreign chip technology.

TechInsights, a Canada-based research organization specializing in semiconductors, announced shortly after launch that the smartphone featured a new 5G Kirin 9000s processor developed by SMIC specifically for Huawei.

This is a “major technical breakthrough for China,” Jefferies analysts said in a research note on Tuesday.

The development has fueled fears among analysts that the tech war between the US and China is likely to intensify in the near future.

According to Reuters, US Representative Mike Gallagher, chairman of the US House of Representatives China Committee, on Wednesday called on the US Commerce Department to halt all technology exports to Huawei and SMIC.

Gallagher was quoted as saying that SMIC may have violated US sanctions as this chip likely could not be made without US technology.

“It’s time to stop all US technology exports to both Huawei and SMIC to make it clear that any company that violates US law and undermines our national security will be cut off from our technology,” he said.

Shares in SMIC, which stands for Semiconductor Manufacturing International Corporation, fell 8.3% in Shanghai and 7.6% in Hong Kong on Thursday. Hua Hong Semiconductor, China’s second-largest chipmaker, fell 5.8%.

Texas Republican Michael McCaul, chairman of the House Foreign Affairs Committee, was quoted by Reuters as saying he was concerned about the possibility that China was trying to “gain a monopoly” on the manufacture of less advanced computer chips.

“We’ve talked a lot about advanced semiconductor chips, but we also have to look at legacy,” he reportedly said, referring to older computer chip technology that doesn’t fall under export controls.

“I think China is also trying to monopolize the market share of older semiconductor chips. And I think that’s part of the discussion that we’re going to have,” he said.

Chinese state media have hailed the development as a sign that the country has managed to “break US sanctions” and achieve “technological independence” in advanced chip manufacturing.

Meme makers on the Chinese internet have even named US Secretary of Commerce Gina Raimondo as the unofficial brand ambassador for the Mate 60 series.

The memes poke fun at the idea that US sanctions, implemented and enforced by the US Department of Commerce, may have indirectly led to the launch of the new phone as China’s domestic firms had to work with available technology.

Raimondo visited China last week when the phone was launched. The memes went viral on the internet and were reported by state broadcaster CCTV.

Before Thursday, shares of Hong Kong’s SMIC had gained more than 20% in a two-week period on investor optimism. Huahong Semiconductor rose 11%.

CNN has contacted the Gallagher and McCaul offices for comment but has not yet received a response.

Huawei was blacklisted by the US Department of Commerce in May 2019 over national security concerns. That means companies must apply for US export licenses to supply technology to Huawei.

SMIC was also added to the same list in 2020, as US officials feared the company could use American technology to support the Chinese military. SMIC denied any ties to the Chinese military.

“The fact that China has made a major breakthrough [semiconductor] “Technology is likely to spark more debate in the US about the effectiveness of sanctions,” he said the Jefferies analysts.

They expect the Biden administration to tighten the China chip ban introduced in October 2022 over the next few months, further restricting China’s access to advanced US semiconductors.

“Overall, the tech war between the US and China is likely to escalate,” they said.

Source : www.cnn.com

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