The U. S. Department of Commerce recently ordered several chip equipment companies to stop shipping certain tools to Hua Hong, China’s second-largest chipmaker. This action aims to slow China’s progress in developing advanced chips. The department notified at least a few companies, including major U. S. chip equipment firms Lam Research, Applied Materials, and KLA, about the restrictions applied to two facilities of Hua Hong that are believed to manufacture some of China’s most sophisticated chips.
China’s foreign ministry spokesperson, Lin Jian, expressed hope that the U. S. would take steps to ensure stable and efficient global supply chains in response to the ban. In March, reports indicated that Hua Hong Group had advanced chip manufacturing technologies that could produce AI chips, marking a key step in China’s tech independence goals. The company’s contract chipmaking unit, Huali Microelectronics, is reportedly working on a 7-nanometer chipmaking process at its facility in Shanghai, where domestic company SMIC is currently the only one capable of such technology.
The new letter also restricts shipments to Huali Microelectronics. Following the announcement, shares of Lam Research, KLA, and Applied Materials dropped, with Hua Hong’s semiconductor shares also declining in Shanghai. The Commerce Department has imposed these restrictions to protect U. S. technological advantages in AI and advanced chip manufacturing for national security reasons. However, these actions may heighten tensions with China, especially with a meeting between President Donald Trump and Chinese President Xi Jinping planned for May.
The U. S. chip equipment suppliers could potentially face billions in losses, particularly if they supply plants that are being built or are transitioning to making advanced chips. While the restrictions might slow China’s chip progress, Hua Hong could potentially find replacements from other foreign or domestic suppliers.
The targeted facilities include Fab 6, which is equipped for 28/22-nm technology, and a second facility labeled 8a, believed to be under construction. Huawei Technologies, also under a U. S. trade blacklist, is collaborating with Hua Hong to transfer some of its AI chip production. Huali’s development of 7-nm chips began last year with help from Huawei-affiliated SiCarrier, planning to produce thousands of 7-nm wafers by late 2026. Meanwhile, the Commerce Department’s communication allows for swift new licensing requirements for specific companies, having been used previously for restrictions on Nvidia and AMD.
With information from Reuters
