China’s top chipmaker plunges 23% on threat of US blacklisting.

Photographer: Qilai Shen / Bloomberg

Semiconductor Manufacturing International Corp. fell the most in seven weeks after a report that the Trump administration was considering adding the chipmaker to a blacklist amid a mounting crackdown on Chinese tech companies.

The shares fell 23%, the most since July 16 at the close of trading in Hong Kong, contributing to a 4.6% drop in the Hang Seng Tech Index. Chinese chipmaker fellow Hua Hong Semiconductor Ltd. plummeted more than 14%. The Defense Department is working with other US agencies to determine whether to take action against SMIC, which would force US suppliers to seek a special license before sending the company, Reuters. reported on Friday.

SMIC’s ties to the Chinese military are under scrutiny, according to the report. The company subsequently He said he is “completely shocked and perplexed by the news,” adding that he has no connection with the Chinese military.

Chinese tech companies, including Huawei Technologies Co., have been caught amid escalating tensions between the two countries, which have clashed on a multitude of issues ranging from trade to the coronavirus pandemic to a law. security imposed by Beijing for Hong Kong. The sanctions against SMIC would be an additional blow to Huawei, which has already been barred from access to US technologies and equipment.

“If implemented, this will seriously undermine SMIC’s ability to advance technologies,” Bernstein analysts led by Mark Li wrote in a note. “Since American equipment is indispensable for R&D and advanced semiconductor production, such a restriction, once implemented, allows the US government to decide how fast or slow SMIC’s technological progress would be.”

Read more: China’s chip executives worry about being next on the US target list.

Chinese Foreign Ministry spokesman Zhao Lijian accused the United States of “blatant intimidation” in response to a question about the SMIC report on Monday.

“What he has done has violated the rules of international trade, undermined global industrial supplies and value chains, and will inevitably damage America’s national interests and its own image,” Zhao told a regular news conference in Beijing. “We urge the United States to stop overstretching the concept of national security to oppress foreign companies.”

Up to 50% of the SMIC team is from the United States, Jefferies estimated. “Should SMIC’s US export ban materialize, it will signal an intensified attack by the United States on China’s semi-industry and more Chinese companies will likely be included,” said analysts led by Edison Lee. “This is negative not only for China’s semi-industry, but also for semiconductor production equipment (SPE) manufacturers globally, as China could account for 24% of global SPE acquisitions in 2020.”

SMIC’s customers and suppliers also sank, with Gigadevice Semiconductor Beijing Inc. and Naura Technology Group Co. loses more than 9% and Datang Telecom Technology Co. falls 3.1%. The chipmaker’s Taiwanese rival, United Microelectronics Corp., jumped more than 9%.