China's chip industry faces new US sanctions amid rising tech tensions

US plans to blacklist 200 Chinese firms, including Huawei partners, in the latest export curbs targeting chip equipment suppliers

China’s semiconductor sector is bracing for another challenge as the US prepares to add around 200 Chinese firms to its trade restriction list. According to a report by the South China Morning Post (SCMP), these include major chip equipment and materials suppliers.

 

This development is expected to further hinder China’s efforts to achieve technological self-reliance.

Impact on Huawei and other Chinese firms

The blacklist is set to target chip fabrication plants and key manufacturing partners of Huawei Technologies, which has been under US sanctions since 2019. The updated export controls, expected to be announced within a week, could significantly disrupt China’s chipmaking supply chain.

 

 

The measures are also likely to impact venture capital firms linked to China’s semiconductor industry and upstream suppliers, such as special gas providers. A source quoted in the SCMP report suggested these restrictions could pose a major threat to China’s semiconductor ambitions.

Escalating tensions

China’s foreign ministry spokeswoman, Mao Ning, condemned the impending sanctions and vowed that Beijing would take firm action to protect its business interests.

 

This move marks an escalation in the ongoing tech conflict between the US and China. It follows the Biden administration’s October 2023 decision to tighten export controls first introduced in 2022. The measures are aimed at restricting China’s access to advanced technologies that could enhance its military capabilities.

 

Previous restrictions primarily targeted China’s artificial intelligence (AI) sector, limiting its access to advanced AI chips from Nvidia and lithography systems from Dutch supplier ASML. According to industry experts, the forthcoming blacklist could deal a severe blow to China’s semiconductor goals, SCMP reported.

 

Despite the sanctions, China has been working to build a self-sufficient semiconductor supply chain. While it has made strides in producing less-advanced chipmaking equipment, the country remains dependent on imported high-end tools like lithography and electron-beam inspection systems.

 

China’s strengths in chipmaking include etching and film deposition technologies, with companies such as Naura Technology Group and Advanced Micro-Fabrication Equipment seeing increased demand. However, these advancements may not fully counter the challenges posed by US trade restrictions.

Efforts to strengthen ties with global firms

In a bid to strengthen foreign business ties, China’s vice-commerce minister Wang Shouwen recently met with Nvidia’s global business operations head. Wang emphasised the “broader opportunities” that an open Chinese market could offer international enterprises.

US trade sanctions on China

The trade relationship between the US and China has been fraught with tensions, particularly since the US-China trade war began in 2018. The US has implemented a range of sanctions, including tariffs, technology export restrictions, and penalties against specific Chinese firms deemed contrary to US interests.

 

In October 2024, the US sanctioned two Chinese drone manufacturers for allegedly supplying weapon systems to Russia, marking a significant escalation in targeting Chinese firms involved in military production.

 

The US has also imposed sanctions related to human rights abuses in Xinjiang, the treatment of Uyghurs, and actions in Hong Kong.

Beijing’s response to sanctions

China’s Ministry of Commerce has expressed strong opposition to the latest sanctions, arguing that these restrictions disrupt normal economic relations and harm businesses in both countries. Beijing has lodged formal complaints with the US and asserted its right to implement countermeasures.

 

For instance, following US arms sales to Taiwan, China sanctioned nine American defence firms, freezing their assets in China and banning them from engaging with Chinese entities. Meanwhile, companies like Huawei are heavily investing in research and development to reduce reliance on foreign semiconductors and bolster domestic innovation.