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US Delays SMIC Suppliers With Export Licenses Despite Chip Crisis: Reuters

US Delays SMIC Suppliers With Export Licenses Despite Chip Crisis: Reuters
  • The U.S. government remained sluggish in approving licenses for companies like Lam Research Corp (NASDAQ: LRCX) and Applied Materials Inc (NASDAQ: AMAT) for selling chipmaking equipment to China’s semiconductor giant Semiconductor Manufacturing International Corp (SMIC) (OTC: SMICY) (OTC: SIUIF) despite a demand spike triggered by the global chip crisis, Reuters reports.
  • Licenses for U.S. suppliers to ship parts and components worth an estimated $5 billion remain outstanding since the company’s blacklisting in December. Certain permits have been approved, including for small numbers of expensive equipment in recent days. The company got blacklisted by the Donald Trump Government over its alleged role in military aid for China. SMIC has denied the allegations.
  • Nothing much has changed since the change in the U.S. Presidentship from a Republican to a Democrat candidate.
  • Usually, most products are granted a license on a case-by-case basis. However, manufacturing equipment for the advanced, 10 nm, and smaller chips are likely to be denied licenses.
  • The government was supposed to conclude within a month. However, the follow-up questions, including the possibility of producing 10nm and smaller chips, have barred it from reaching a concrete conclusion.
  • The U.S. Commerce Department ruled out the contribution of the delay towards the growing chip crisis. According to the department, the crisis is tied to older technologies as opposed to advanced technologies. However, it did not address the probable impact of the delay on the older technologies.
  • SMIC being the largest foundry in mainland China is an essential player in the global semiconductor supply chain. The pandemic lockdowns further worsened the scenario by triggering demand for electronics such as laptops and phones. The company admitted its failure to accomplish demand for certain technologies, including the heavy load on its plants for several quarters.
  • SMIC’s technological abilities reportedly lag far behind Taiwan Semiconductor Manufacturing Co Ltd (NYSE: TSM).
  • Multiple license applications from key suppliers Applied Materials and Lam Research remain pending to date.
  • However, Entegris Inc (NASDAQ: ENTG) received its first license for sale to SMIC within a week.
  • Qualcomm Inc (NASDAQ: QCOM) is also yet to receive permission for supplying tools to SMIC for producing old technology chips for Qualcomm.
  • Reuters notes that SEMI, a worldwide industry group, said that SMIC accounts for $5 billion in annual U.S. sales.
  • Price action: SMICY stock closed at $14 on Wednesday.
  • Relates News: Biden Seeks $37B In Congressional Funding To Counter Chip Crisis: Reuters
  • Image Courtesy: Wikimedia

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