China chip shares fall after US calls for new restrictions on high-end technology

The US said it would issue temporary licenses from October 21 to April next year to allow businesses to manufacture certain high-tech products in China for use abroad.

China’s largest chip maker, Semiconductor Manufacturing International Joint Stock Companytraded 3% lower on Monday afternoon in Hong Kong, amid a broader market sell-off.

Hua Hong Semiconductor fell about 9%, while Shanghai Fudan Microelectronics more than 20% off as of Monday afternoon.

Shares of American chipmakers Nvidia and AMD fell in Friday’s session as worries about falling demand dragged down the sector.

China’s Foreign Ministry spokesman Mao Ning said at a briefing over the weekend: “The US has abused export control measures to deliberately block and manipulate Chinese enterprises.”

“Such practice goes against the principle of fair competition and international trade rules,” she said. “It will not only harm the legitimate rights and interests of Chinese companies, but also harm the interests of American companies.”

Mao did not mention any plans for China’s countermeasures.

The global semiconductor supply chain is highly specialized. Only a few companies have the most advanced technology, while China is investing heavily in domestic companies looking to catch up.

Taiwan Semiconductor Manufacturing Co dominates the production capacity of the world’s most advanced semiconductors. Dutch-based ASML is The only company in the world can create the complex machines needed to manufacture the most advanced chips.

On the other hand, US companies like Lam Research, KLA and Applied Materials are industry leaders for other tools needed to manufacture chips.

The US government has previously placed Chinese companies Huawei and SMIC in blacklist that requires suppliers to obtain a license before selling to them.

But the suppliers to those two companies received licenses last year to do billions of dollars of business, according to Reuters.

The US Bureau of Industry and Security estimates the latest rule changes mean it will receives at least 1,600 new license applications each year.

International cooperation is also needed, a senior US government official said at a news conference on Thursday, Reuters reported.

“We recognize that the unilateral control measures we have in place will lapse over time if other countries do not join us,” the official said in the report. “And we risk damaging America’s technological leadership if foreign competitors are not subject to similar controls.”

The US Embassy in Beijing did not immediately respond to a request for comment on the CNBC report.