Blacklist Exceptions
A recent reveal of licenses granted to suppliers to Huawei (pvt) and SMIC (688981.CH), both of whom are on the US ‘entities’ list, has indicated that between November 2020 and April of this year 113 export licenses were granted to Huawei suppliers, worth ~$61b, and an additional 188 licenses worth $42b were granted to suppliers of SMIC, China’s largest semiconductor producer. The data goes further in that it shows that while only 69% of requested licenses from Huawei suppliers were granted, more than 90% of requests by SMIC suppliers were allowed. Partisan politics took the data for a ride with China hawks stating that the President is not taking the economic and security threat from China seriously and that transparency and public scrutiny on how the nation transfers it technology to adversaries is in our national interest.
The Commerce Department did note that the data was an ‘arbitrary snapshot’ of approvals and risks misrepresenting the national security determinations made by the government. Even former Trump officials chimed in stating that the document is not an accurate window into the licensing process for companies on the entity list, especially when it was found that 80 of the 113 Huawei supplier licenses and 121 of the 188 SMIC licenses were for non-sensitive items that only required a license because the companies were on the list, and that $87b worth of Huawei licenses were approved after its inclusion on the entities list during the Trump administration.
A recent Chinese document concerning a potential new semiconductor fab to be built by SMIC has indicated that the company is focused on more mature nodes, rather than trying to compete with Taiwan Semi (TSM) or Samsung (005730.KS) at 7nm or less. We expect while there is certainly demand for those nodes on the Mainland, there would be much difficulty in obtaining the wide variety of design and production tools that would be needed to build a leading edge semiconductor fab in China, and while the current administration might be a bit more inclined to authorize trade exceptions, it doesn’t seem that the US is giving away any leading-edge technology, nor is it allowing those suppliers outside of the US much leeway in bypassing US trade restrictions.
Given the potential for an extended semiconductor shortage over the next few years, it might be in the best interests of the US to keep some of those trade channels open with Huawei and SMIC rather than focusing on the political outrage that has followed the data. Semiconductor price inflation and shortages can take a nasty toll on the global (and US) economy and while we don’t have to hand over anything of consequence to get some reciprocal trade, a few licenses are not going to tip the balance of ‘technology power’ to the Chinese.
The Commerce Department did note that the data was an ‘arbitrary snapshot’ of approvals and risks misrepresenting the national security determinations made by the government. Even former Trump officials chimed in stating that the document is not an accurate window into the licensing process for companies on the entity list, especially when it was found that 80 of the 113 Huawei supplier licenses and 121 of the 188 SMIC licenses were for non-sensitive items that only required a license because the companies were on the list, and that $87b worth of Huawei licenses were approved after its inclusion on the entities list during the Trump administration.
A recent Chinese document concerning a potential new semiconductor fab to be built by SMIC has indicated that the company is focused on more mature nodes, rather than trying to compete with Taiwan Semi (TSM) or Samsung (005730.KS) at 7nm or less. We expect while there is certainly demand for those nodes on the Mainland, there would be much difficulty in obtaining the wide variety of design and production tools that would be needed to build a leading edge semiconductor fab in China, and while the current administration might be a bit more inclined to authorize trade exceptions, it doesn’t seem that the US is giving away any leading-edge technology, nor is it allowing those suppliers outside of the US much leeway in bypassing US trade restrictions.
Given the potential for an extended semiconductor shortage over the next few years, it might be in the best interests of the US to keep some of those trade channels open with Huawei and SMIC rather than focusing on the political outrage that has followed the data. Semiconductor price inflation and shortages can take a nasty toll on the global (and US) economy and while we don’t have to hand over anything of consequence to get some reciprocal trade, a few licenses are not going to tip the balance of ‘technology power’ to the Chinese.
RSS Feed