Key semiconductor suppliers see gains amid reports of softer export restrictions to China. Could this shift reignite the global tech supply chain?
In the never-ending battle for foreign supremacy that exists between the US and China, both powerhouse economies have found a new battleground to wage war on, and that is in the chip manufacturing sector, it would be an understatement to say that both countries don’t exactly see eye to eye on the world of manufacturing, tech, and AI.
Unfortunately, chip manufacturers have been caught in both countries’ crosshairs, and they have been on the receiving end of some heavy foreign policy decisions. However, in what can only be described as a major backstep on policy from the US, the Biden administration intends to make some major shakeups with their final days in office.
It would appear as though there has been some cooling off of political tensions between the US and China as the US foreign office intends to cool off some exports and imports of chips to China, this no doubt has to be a rebuttal to some of the incoming president Donald Trump, who has touted plans of implementing heavy tariff policies on countries like China, whom he deems have stolen American jobs.
Shares of major global semiconductor equipment companies saw a significant surge on Thursday following reports that the U.S. is contemplating sanctions on China’s chip industry, with these measures being less severe than previously proposed. ASML’s stock rose approximately 2.9% in afternoon trading in Europe, while Tokyo Electron experienced a remarkable 6.7% increase in Japan.
In another notable development, Chinese technology behemoth Huawei is reportedly reconsidering the number of suppliers it plans to add to its export blacklist, known as the Entity List. Notably, ChangXin Memory Technologies, a memory company and potential competitor to SK Hynix and Samsung, will not be included on this list.
Analysts indicated that ASML had earlier projected a 30% drop in revenue from China for the next year. However, the exclusion of ChangXin could lead to ASML’s sales in China declining by less than anticipated. ASML finds itself at the center of the ongoing U.S.-China technology conflict over semiconductors due to its pivotal role in the chip supply chain.
The Dutch company manufactures critical machinery essential for producing the most sophisticated semiconductors. However, these machines have yet to be exported to China due to various export controls.
Recently, both the Dutch and U.S. governments have enforced restrictions, complicating ASML’s ability to export some of its less advanced machines to China. ASML sells its machines to fabrication plants, or “fabs,” such as Taiwan’s TSMC and China’s SMIC, meaning any regulations affecting semiconductor demand or targeting manufacturers directly could have a detrimental impact on ASML’s business. controls.
More recently, the Dutch and U.S. Governments have imposed restrictions that make it more difficult for ASML to export some of its less advanced machines to China.
The company sells its machines to “fabs” or plants that actually manufacture chips, such as Taiwan’s TSMC as well as SMIC in China. Any rules that hit demand or directly target semiconductor manufacturers will hurt ASML.
It remains to be seen how these decisions will impact the global semiconductor market, but for now, all we can do is sit and watch with bated breath.
