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U.S. Ban threatens Beijing ambitions like Tech Power

A US ban on US companies doing business with a Chinese chipmaker accused of stealing technology secrets threatens to raise…

A US ban on US companies doing business with a Chinese chipmaker accused of stealing technology secrets threatens to raise a $ 5.7 billion fund-based company in state funds, which harms China’s ambition to build a world-leading semiconductor industry.

Fujian Jinhua Integrated Circuit Co., founded in 2016, built a factory aimed at completing China’s confidence in foreign semiconductors and lubricated by Beijing as a key player in the last phase of its three-decade program to build globally competitive chipmakers. Jinhua, which employs more than 1,000 people, aimed to begin mass production of memory cards used in smartphones and USB devices at the end of the year in pursuit of the government’s goal of halving semiconductor imports by 2020.

These plans are likely to stall because Jinhua is depending on a link of American suppliers that provide design and technology for the components, analysts say.

The American Trade Department on Monday prevented exports and transfers of American origin technology to Jinhua, accused of Idaho-based

Micron Technology
Inc.


MU 1.13%

of stealing design secrets – without official permission. US efforts to include China’s technical upturn are part of a wider trade struggle between the world’s two largest economies, which has largely focused on tariffs.

The ban was different from a similar ban on Chinese telecom giants

ZTE
Corp.

was introduced earlier this year, as the trade department cited national and economic security issues in Jinhua’s case. ZTE’s punishment, which was later reversed following the intervention by President Trump, was introduced to violate the terms of an anti-sanctions agreement to Iran and North Korea.

“What the United States does now can be spread to all that is considered advanced technology that the United States does not want China to have more,” said Alicia Garcia Herrero, a Chinese focused economist at the French Investment Bank

Natixis
.

“This case is very different from ZTE.”

Monday’s restrictions on Jinhua follow tighter US curbs on Chinese investment in US technology companies. In response, China has had a residence permit, which led in July to

Qualcomm
Inc.

scraps its $ 44 billion purchase of Dutch chip maker

NXP semiconductor

NV.

China’s Foreign Ministry said Tuesday that Chinese companies should comply with laws, but “we also demand that foreign governments provide fair and sound treatment for our businesses.” Jinhua, whose shareholder contains a handful of companies owned or controlled by the province of Fujian, did not respond to calls that sought comments.

Jinhua is one of a trio of state-run Chinese semiconductor companies that Beijing promises to increase production to the memory market, including Tsinghua Unigroup Ltd. and Innotron Memory Co. Jinhua says on its website it was inducted in a semiconductor industry drawing under China’s five-year plan, initiated in 2016, a national development roadmap closely associated with ascension of President Xi Jinping.

As part of its efforts to manage domestic markets, China is estimated to invest $ 150 billion in the decade from 2017 to support its chip industry and develop more sophisticated ed know-how that will move up the value chain. For example, in smartphones, Chinese brands account for about 50% of global exports, but still depend on imports for 90% of their semiconductor needs. Beijing spent $ 260 billion on imports of chip last year.

Jinhua pivoted against the development of DRAM for consumer electronics markets. Jinhua’s senior executives at Silicon Valley Recruitment Fairs last year said it planned a pilot run at the end of 2017 and mass production a year later, according to Micron’s filing. Micron refused to comment. The company started some production in September but did not run on planned capacity, according to a person familiar with the case.

Micron Technology in December sued Jinhua in California, as well as the Chinese company Taiwanese partner

United Microelectronics
Corp.

, claimed to stole Micron’s talent and trade secrets. Jinhua disputes the claim and the case continues.

A Chinese court in July is sitting in Jinhua in a court trial that the Chinese company received Micron, accusing Micron of breaking Jinhua patent and stopping Micron from selling in China. Micron disputes the charges. UMC said Tuesday the new edge of Jinhua will not affect UMC’s operations and that UMC does not export products to Jinhua.

The Ministry of Commerce ban will harm Jinhua because the company is likely based on a handful of California-based companies that dominate the global range of microtechnics that stacks, connects, cleans and measures the discs that go to make chips. Among them are

Applied material
Inc.,

Lam Research
Corp.

, and

KLA-Tencor
Corp.

, according to analysts.

“It is critical for China’s semiconductor ambitions,” said Mark Newman, a semiconductor analyst at Bernstein Research. “It’s unlikely they could build without using” these companies. “

China accounted for about 18% of Applied Materials revenue during the year to October 2017 and 16% for Lam Research and KLA-Tencor this year according to FactSet. The US companies did not respond immediately to requests for comments made during office hours

China’s semiconductor industry is still on the verge of its fate, which is largely subject to an escalating Sino-US trade permit.

“The US government’s verdict is a sign that the United States is willing to play the war card,” said Wang Yanhui. , General Secretary of Mobile China Alliance, a telecommunications industry consortium.

Write to Chuin-Wei Yap at [email protected] and Yoko Kubota at [email protected]

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