Semi Stocks Fall as U.S. Ramps Up Export Controls of High-end Chips to China

By Senad Karaahmetovic

Shares of major U.S. chipmakers are trading lower in pre-open Monday after the Department of Commerce’s Bureau of Industry and Security (BIS) announced a series of limits on exports of high-end AI chips to China.

Export controls are also aiming to seriously limit China’s ability to purchase and manufacture top-end chips. As many as 31 firms are added to the unverified list after BIS previously informed NVIDIA (NASDAQ:) and AMD (NASDAQ:), among others, of new export limits.

“As I told Congress in July, my north star at BIS is to ensure that we are appropriately doing everything in our power to protect our national security and prevent sensitive technologies with military applications from being acquired by the People’s Republic of China’s military, intelligence, and security services,” said Under Secretary of Commerce for Industry and Security Alan Estevez in a press release.

Here’s what chip analysts on Street have to say about the latest developments.

Stifel: “This will leave a mark. On the one hand, the most advanced logic foundry operating in China (SMIC) was previously added to the Entity List (in late 2020), thus the incremental impact to semicap suppliers here is likely limited. The bigger impact will be in cutting off the flow of equipment/related items into memory companies YMTC (NAND) and CXMT (DRAM).”

Bank of America: “As we noted recently, the most impact (5%-10% of sales) will likely be felt by: 1) the leading CPU (more INTC than AMD) and AI accelerators (NVDA), 2) Semicap (LRCX most exposed to YMTC). No mention of EDA tools, though broad implementation could impact them as well.”

Citi: “We believe the new rules could lead to a) DUV lithography restrictions to China, and b) new data center processor restrictions (includes CPUs, TPUs, FPGAs in addition to prior GPUs only) if the processor chips hit a certain threshold of compute instructions (4800+) and/or compute power density (0.02+ PFLOPS/sq feet).”

Chip companies lower in U.S. pre-market trading include: Lam Research (NASDAQ:) -1.3%, Micron (NASDAQ:) -0.6%, Applied Materials (NASDAQ:) -0.9%, Nvidia -1.2%, AMD -1.1%, etc.

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