| China's goal of producing 70 per cent of the semiconductors it needs by 2025 has just been pushed further out of reach by the Trump administration. As we first reported, the US commerce department has said exports to China's biggest chipmaker — Semiconductor Manufacturing International Corporation — will require licences for specific products. It said exports to SMIC posed an "unacceptable risk" of being diverted to "military end use", according to a copy of a letter seen by the FT. This means SMIC will find it more difficult to obtain chipmaking equipment for its production lines from US suppliers such as Applied Materials, Lam Research and KLA. Another key supplier, the Dutch company ASML, has already been unable to obtain a licence to export to SMIC. Only around 16 per cent of China's semiconductor needs are currently being matched by domestic production, according to one estimate, and restricted access to equipment capable of making chips at the latest "node" of miniaturisation will inevitably make high-end Chinese products harder to sell abroad. While the US is making this a national security issue, restrictions on SMIC following those imposed on Huawei clearly relate to competitiveness as well, as the US trails China in 5G and seeks to maintain its leadership in semiconductors that power our smartphones, computers and other devices. The US chip industry has cause to be worried itself — the equipment suppliers will lose business, Qualcomm chips are made by SMIC and Nvidia is depending on China's approval for its deal to buy chip designer Arm. For now, SMIC's shares are taking the hit — falling 7 per cent on the news on Monday, while US-China trade tensions are being blamed for Japanese memory chip maker Kioxia today postponing what would have been Japan's biggest IPO this year.
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