China’s Largest Chipmaker Will Be ‘Shut Down’ If It Sells To Russia Says U.S. Official

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In the wake of American sanctions against the Russian Federation following its decision to invade the Eastern European nation of Ukraine, the United States Department of Commerce Secretary Ms. Gina Raimondo has stated that her country will target Chinese chipmakers next if they decide to supply products to Russia. The American sanctions are designed to hamper the Russian military and government agencies from accessing advanced technologies, and Secretary Raimondo made the remarks in an interview given to the New York Times yesterday.

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The brief statements primarily served to highlight the American response should Russia try to work around the sanctions levied against it. Most of the advanced semiconductors in the world are manufactured by the Taiwan Semiconductor Manufacturing Company (TSMC), which has announced that it will comply with the American sanctions to stop supplying products to Russia.

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While foreign companies such as TSMC are responsible for directly manufacturing semiconductors, a host of American-origin hardware and software products are used in the process. This enables the Commerce Department to exercise leverage in the semiconductor industry, by limiting the abilities of countries acting against U.S. foreign policy and national security interests to procure the advanced products.

The U.S. has previously used these sanctions to limit the Chinese telecommunications giant Huawei Technologies' ability to procure advanced semiconductor products from TSMC. This was due to the company's links with the Chinese military, and later sanctions also limited the Chinese Semiconductor Manufacturing International Corporation's (SMIC) ability to produce advanced chips.

These restrictions were announced in December 2020, and they targetted the 10-nanometer and smaller manufacturing processes. In the semiconductor industry, a manufacturing process is generally dubbed after one of the dimensions of a transistor that is fabricated with it, and smaller dimensions signify technological advancements.

Inside a clean room of China's Semiconductor Manufacturing International Corporation (SMIC). The company's shares closed 1.20% higher in Hong Kong today. (Image Credits: REUTERS/ Nir Elias)

According to Ms. Raimondo, as published in the New York Times:

Russia “is certainly going to be courting other countries to do an end run around our sanctions and export controls,” Ms. Raimondo said. But if the United States were to find that a company like the Semiconductor Manufacturing International Corporation, in Shanghai, was selling its chips to Russia, “we could essentially shut SMIC down because we prevent them from using our equipment and our software,” she said.

The Secretary went on to add that:

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“They have their own self-interest to not supply this stuff to Russia. So they’re not doing it out of the goodness of their heart. It would be devastating to China’s ability to produce these chips,”

Despite spending heavily on capital expenditure over the past couple of years, SMIC remains unable to globally catch up to its rivals in the semiconductor industries. Several reasons are behind this, including a limited access to the latest chip manufacturing machines and a lack of experience in the sector.

Machines capable of fabricated the latest semiconductors are solely manufactured by the Dutch company ASML Holding N.V. (ASML). This limits the ability of multiple companies being able to gain access to them, and without them, the physical limitations in printing the circuits at sub-microscopic dimensions come into play.

Sanctions against Huawei have stopped the company from being able to access the latest processors and other chips for its devices, such as smartphones.Therefore they have limited its ability to perform in the high-end markets that generally see newer technologies introduced each year. Most of this is due to TSMC's rapid manufacturing process evolution and lower performance requirements for smartphone products.