US sanctions help vaporize much of China’s chip wealth • The Register

US chip sanctions on China have combined with a weaker economy to vaporize some of the fortunes of China’s wealthiest semiconductor entrepreneurs.

The cumulative wealth of China’s top 100 chip barons fell 28 percent in 2022 from a year earlier, the South China Morning Post reported, citing a survey by Chinese-language website At the same time, the number of silicon tycoons in China with more than 10 billion yuan ($1.43 billion) in personal wealth fell from 22 last year to 17 in 2022.

It’s a reversal of fortunes for China’s chip magnates, who have amassed wealth in recent years on the government’s push toward semiconductor self-sufficiency.

That wealth has declined in part because of strong ties between China’s government and industry. These ties are dictated by the country’s “military-civilian fusion” doctrine, which requires private companies to share their technologies with the military.

Through the Trump and Biden administrations, the US government has cited this doctrine as a key reason for increasing trade restrictions against Chinese firms over the past two years. In October, the White House cited America’s national security and foreign policy interests as reasons for new export restrictions on advanced chips and chip-making tools to China.

Chinese chipmakers have reportedly sounded the alarm over recent US export restrictions on cutting-edge chip technology, saying the trade bans would be extremely damaging to their companies. It’s worth noting, however, that American sanctions are expected to have a broader impact globally, raising prices for consumers and businesses due to an increasingly fractured supply chain.

Things have gotten even worse for some silicon companies in the Middle Kingdom since the new sanctions were introduced. Last week, YMTC, China’s largest domestic flash memory supplier, was added to the US Department of Commerce’s Entity List along with 35 other local companies.

The American blacklist requires affected companies to obtain a special license to import certain US technologies. For YMTC, this means that not only is it denied access to advanced chip-making equipment in tools, it is also banned from procuring other types of materials it needs to make flash memory chips unless given a special one License from USA. In some cases, that means when Satan goes to work with a snow plow.

Analysts said that Entity List placement could affect YMTC’s manufacturing capabilities, and it could even be forced to exit the market for 3D NAND, a crucial technology for advanced memory and storage devices. U.S. restrictions on YMTC prompted Taiwanese research firm TrendForce to sharply revise its 2003 growth forecast for 2023 to a 7 percent decline from an expected 60 percent year-on-year increase.

The other issue worrying Chinese chipmakers is that the country’s economy has been hit hard by the COVID-19 pandemic and global demand has plummeted. Economists have forecast China’s economic growth to be between 2.8 percent and 3.2 percent, a level not seen since 1976. This has prompted Beijing to make plans to prioritize economic stabilization next year.

It remains to be seen whether the People’s Republic of China can stimulate its economy sufficiently to counteract the effects of the US sanctions. White House officials are curious to see if China will change policy when a new economy secretary is appointed early next year. ® US sanctions help vaporize much of China’s chip wealth • The Register

Rick Schindler

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