BEIJING/TOKYO -- The U.S. has struck at the heart of Beijing's ambition to become self-sufficient in semiconductors as the Trump administration issues its latest crackdown on Chinese tech companies, tightening export controls on top chipmaker Semiconductor Manufacturing International Co.
The de facto ban announced Friday makes it difficult for SMIC to import vital equipment for manufacturing semiconductors, an area in which Japanese companies such as Tokyo Electron and Screen Holdings [formerly Dainippon Screen] excel.
Though the Commerce Department's directive is aimed at American businesses, instructing them to apply for licenses to ship certain controlled items to SMIC, it may extend to products of non-American companies that use U.S. technology.
Tokyo Electron supplies etching machines and film deposition equipment to SMIC, while Screen deals in surface cleaning machinery. Companies such as Nikon and Canon have been promoting semiconductor-exposure devices to Chinese clients.
Whether these Japanese companies will be subject to the new U.S. rules remains unclear.
"We have no comment on deals with specific clients," Nikon told Nikkei.
But in the broader picture, the regulation threatens to throw a wrench into China's high-tech industry, derailing President Xi Jinping's game plan of increasing semiconductor self-sufficiency and reducing dependence on the U.S.
SMIC listed in July on the Shanghai STAR Market, dubbed China's Nasdaq, for the biggest share offering in mainland China in 10 years. In May, the group's unit operating its Shanghai plant received capital from a state-related fund.
The chipmaker's total fundraising this year is thought to reach nearly $10 billion, as it expands production and accelerates research and development.
This is in line with Beijing's "Made in China 2025" initiative, which prioritizes the semiconductor industry as a development area. The goal is to elevate China's self-sufficiency in the field to 70% by 2025, from less than 20% now. SMIC has been seen as the flag bearer in this challenge.
SMIC's current mainstay chips are made with 55- to 65-nanometer technologies, with its most advanced version running on a 14-nm process. The company is said to be two generations behind market leader Taiwan Semiconductor Manufacturing Co., which handles 5-nm technology.
With the new U.S. restrictions in place, Xi's dream of chip self-sufficiency looks increasingly difficult to attain by 2025. But that difficulty also may cause headaches for American companies that do business with SMIC.
Qualcomm and Broadcom are among SMIC's top five clients, Chinese local media report. Both companies outsource part of their production to the mainland chipmaker, which is cheaper than TSMC.
As U.S.-China tensions rise, it may grow difficult for the American companies to continue relying on the mainland. Yet, with SMIC accounting for just 5% of the chip outsourcing market, some say the impact of the restrictions may be limited.
China has imported $2.7 billion in chip manufacturing equipment from Japan this year through August. Japan accounted for roughly 30% of China's imports, higher than the Netherlands or the U.S.
Tokyo Electron has seen a 46% rise in sales to China during the April-June quarter, as its Chinese clients increased investment.