Ban, from the United States, threatens China's ambitions as Tech Power
Ban, from the United States, threatens China's ambitions as Tech Power
The US ban on US companies doing business with a Chinese chip maker accused of stealing technology secrets threatens to turn a $ 5.7 billion company into state funds, hurting China's ambitions to build a semiconductor industry of World class.
Fujian Jinhua Integrated Circuit Co., founded in 2016, built a factory aimed at ending China's dependence on foreign semiconductors and was anointed by Beijing as a key player in the last phase of its three-decade program to build chip makers competitive worldwide. Jinhua, which employs more than 1,000 people, aimed to begin mass production of memory chips used in smartphones and USB drives by the end of the year, in pursuit of the government's goal of halving semiconductor imports by 2020.
Those plans are likely to stop because Jinhua depends on a handful of US suppliers that provide design and engineering for the components, analysts say.
The Department of Commerce of the United States on Monday banned exports and technology transfers of US origin to Jinhua-What is accused by Idaho
Micron Technology
Inc.
MU 2.87%
to steal design secrets, without official permission. The efforts of the United States to contain China's technological boom They are part of a broader trade struggle between the two largest economies in the world that has focused mainly on tariffs.
The ban differed from a similar ban on the Chinese telecommunications giant
ZTE
Corp.
imposed earlier this year, in which the Department of Commerce cited national and economic security concerns in the case of Jinhua. The punishment of ZTE, Later it was reversed after the intervention of President Trump, was imposed for violating the terms of an agreement on sales to eliminate sanctions on Iran and North Korea.
"What the United States is doing now could be extended to anything that is considered cutting-edge technology that the United States does not want China to have anymore," said Alicia Garcia Herrero, a China-focused economist at the French investment bank.
"This case is very different from ZTE."
Monday's restrictions on Jinhua follow tougher restrictions in the United States on Chinese investment in US technology companies. In response, China has delayed approvals of agreements, which led in July to
Qualcomm
Inc.
rejecting its purchase of $ 44 billion from the Dutch chip maker
NEVADA.
The Chinese Foreign Ministry said on Tuesday that Chinese companies should comply with the laws, but "we also demand that foreign governments provide fair and solid treatment to our companies." Jinhua, whose shareholders include a handful of companies that are owned or controlled by the Fujian provincial government. I did not answer calls looking for comments.
Jinhua is one of the three state-backed Chinese semiconductor companies that Beijing is preparing to increase production for the memory market, including Tsinghua Unigroup Ltd. and Innotron Memory Co. Jinhua says that on its website it was incorporated into a model of the semiconductor industry. China's five-year plan, which began in 2016, is a national development roadmap closely related to the rise of President Xi Jinping.
As part of its efforts to encourage national chips, it is estimated that China will invest $ 150 billion during the 2017s to support its chip industry and develop more sophisticated knowledge that will drive it in the value chain. In smartphones, for example, Chinese brands represent around 50% of global exports, but still depend on imports for 90% of their semiconductor needs. Beijing spent $ 260 billion on chip imports last year.
Jinhua turned to the development of DRAM for the consumer electronics markets. Jinhua's top executives at the Silicon Valley recruitment fairs late last year said they planned a pilot race in late 2017 and a mass production a year later, according to the Micron presentation. Micron declined to comment. The company started some production in September, but it is not working at the planned capacity, according to a person familiar with the matter.
Micron Technology in December sued Jinhua in California, as well as the Taiwanese partner of the Chinese company
United microelectronics
Corp.
, alleging that they stole Micron's talent and trade secrets. Jinhua answers the claim and the case continues.
In July, a Chinese court sided with Jinhua in a retaliatory lawsuit that the Chinese company initiated against Micron, which accused Micron of violating Jinhua's patents and prevented Micron from selling in China. Micron disputed the charges. UMC said on Tuesday that the new brake in Jinhua will not affect UMC's operations and that UMC does not export products to Jinhua.
The Department of Commerce ban will hurt Jinhua because the company probably relies on a handful of California-based companies that dominate the global supply of microtechnology that stacks, connects, cleans and measures wafers used to make chips. Among them are
Applied materials
Inc.,
Lam Research
Corp.
Y
KLA-Tencor
Corp.
According to analysts.
"It's fundamental to China's semiconductor ambitions," said Mark Newman, semiconductor analyst at Bernstein Research. "It is unlikely that they can build without using" these companies.
China accounted for about 18% of Applied Materials revenues in the year through October 2017, and 16% for Lam Research and KLA-Tencor in the year to June, according to FactSet. US companies did not respond immediately to requests for comments made outside office hours.
China's semiconductor industry is now pushing the envelope, and considers that its fate is subject in large part to an escalation of Sino-US trade.
"The ruling of the United States government is a sign that the United States is willing to play the trade war card," said Wang Yanhui, general secretary of Mobile China Alliance, a consortium of the telecommunications industry.
-Yang Jie, Jeremy Page and Yifan Wang contributed to this article.
Write to Chuin-Wei Yap in chuin-wei.yap@wsj.com and Yoko Kubota in yoko.kubota@wsj.com
.
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