Beijing’s biggest chip-making champion SMIC faces uncertain future after US blacklisting

The future of Semiconductor Manufacturing International Corp (SMIC), mainland China’s largest contract chip maker, is now under a cloud after it was put on a US trade blacklist, which the company said would make it difficult to develop advanced chip-making processes in the country.

“[The addition to the blacklist] will have significant negative impacts on research and development of advanced processes smaller than 10 nanometres [based] upon our initial assessment,” SMIC said in a statement on Monday, adding that the short-term impact on the company’s operation and finances would be limited.

The curbing of SMIC’s ability in advanced chip-making could have a profound impact on China’s efforts to catch up in semiconductors, a key part of Beijing’s broad strategy to counter US technological dominance.

SMIC is only able to mass produce chips at the 14-nm node, lagging far behind state-of-the-art foundries like Taiwan Semiconductor Manufacturing Co, which aim to produce 3-nm node chips by 2022.

Arisa Liu, an analyst for the Taiwan Institute of Economic Research, said SMIC’s short-term approach will now be titled towards smaller wafers and third-generation semiconductors and that it could only return to advanced process nodes once the deadlock between the US and China has eased.

However, one analyst believes the sanctions will have a broader reach. “Frankly, the impact on its mature nodes will also be significant because it’s hard to find substitutes for US suppliers in the short-term,” said Sheng Linghai, senior semiconductor analyst at Gartner. “The magnitude of the impact is at the discretion of the US government.”