Investing.com – SMIC shares fell on Friday, leading declines among China’s biggest tech companies, after the Biden administration suggested China’s top chipmaker may have flouted U.S. export restrictions to make a new chip for Huawei’s flagship phone.
A senior US Commerce Department official said during a congressional hearing on Thursday that SMIC, formally known as Semiconductor Manufacturing International Corp (HK:), may have illegally obtained US chip technology to make the chip, although officials are still investigating the matter.
His comments raised renewed uncertainty about potential new restrictions on Chinese companies, a trend that has been steadily gaining momentum as government officials also called for a ban on the popular social media app TikTok.
The Biden administration tightened export restrictions on Chinese chipmakers in 2022 and 2023, and the latest round of restrictions put in place in mid-2023 was aimed at denying the country access to the latest developments in artificial intelligence. Artificial intelligence giant NVIDIA Corporation (NASDAQ:) can no longer sell its most advanced chips in China.
Huawei is also a controversial topic for US lawmakers after the Trump administration blacklisted the company in 2019 over ties to the Chinese military. Similar actions were taken against SMIC in 2020, although both firms denied such ties.
Chinese tech worried about sanctions
SMIC shares fell more than 5% in Hong Kong trading, while peers Shanghai Fudan Microelectronics Group Co Ltd (HK:) and Hua Hong Semiconductor Co., Ltd. (HK:) fell more than 3% each.
Losses by chip makers weighed on shares of broader technology companies, including internet giants. Alibaba (NYSE:) (HK:), Baidu (HK:) and Tencent Holdings (HK:) are losing between 2% and 4%.
That sent Hong Kong’s index down 2.9%, while losses in mainland Chinese tech companies fell more than 1.4% each.
SMIC’s losses open up buying opportunities elsewhere
But the prospect of further U.S. action against SMIC has opened the door for other Chinese chipmakers to step in to fill potential supply gaps in Chinese semiconductor markets.
NAURA Technology Group Co Ltd (SZ:) and Hygon Information Technology Co Ltd (SS:) were seen as the two main candidates for such a deal. Their shares rose 4.2% and 0.1%, respectively, on Friday.