Shares in top Chinese chipmakers shed $5bn in market value on Monday, as new US export controls threatened to obstruct Beijing’s plans for technological self-sufficiency.
Semiconductor Manufacturing International Corp, China’s largest chipmaker, fell as much as 5.2 per cent on Monday, while Hua Hong Semiconductor tumbled as much as 10.3 per cent and Shanghai Fudan Microelectronics plunged as much as 22.1 per cent.
The sharp losses came after Washington unveiled new export controls on Friday that restrict the sale of semiconductors made with US technology unless vendors obtain an export licence.
The controls also bar US citizens or entities from working with Chinese chipmakers without explicit approval and limit the export of manufacturing tools that would allow China to develop its own equipment.
The US commerce department said on Friday that it had added 31 companies to its “unverified list” in an effort to make it more difficult for Chinese companies to manufacture or obtain advanced computer chips vital to cutting-edge technologies.
Shenzhen-listed Naura Technology, which said one of its units had been added to the list, fell the maximum 10 per cent allowed in Shenzhen at the start of trading on Monday.
“Most of the new companies are not listed, but the restrictions are still affecting overall sentiment in the market,” said Dickie Wong, head of research at Kingston Securities in Hong Kong.
The restrictions had already sent the Philadelphia Stock Exchange Semiconductor index down more than 6 per cent on Friday as analysts warned that Chinese chip producers would take a substantial hit from the new restrictions. The Chinese semiconductor market, based on end users, accounts for almost a quarter of global demand.
“The tensions between China and the US are not going to ease up, so any addition to any entity list is not going away,” Wong added. “We have to expect that in the near term, more companies will be added to the list as well”.
The falls for Chinese chipmakers outstripped losses for broader Chinese markets as traders returned from a week-long national holiday in the mainland. The CSI 300 index of Shanghai- and Shenzhen-listed shares edged down 1.1 per cent in morning trading in Asia while benchmark Hong Kong’s Hang Seng index fell 2.6 per cent.
“Washington is never going to back down on this,” said Andy Maynard, a trader at brokerage China Renaissance, adding that share price volatility was being exacerbated by low turnover as Chinese investors appeared reluctant to return to the market after the long holiday.
Traders said the restrictions were also expected to hit big suppliers across the rest of the Asia-Pacific region, but that any market reaction in Japan, South Korea and Taiwan would be delayed until those markets returned from national holidays on Tuesday.