Chinese government asks contract chipmakers to prioritize local customers

It seems that supporting local high-tech companies in one way or another, while oppressing foreign companies that have invested in China, is not enough for the Chinese government: according to a new Bloomberg story, the government Chinese has established a new committee to maintain a white list of Chinese companies that manufacture hardware or software to replace foreign technology in sensitive industries. Hua Hong Semiconductor, the second-largest contract chip maker in China, has informed its international customers that it now needs to prioritize Chinese customers. This means that he won’t be able to give them the same amount of tokens as in the past and the company may have to cancel some orders due to a new national policy. This directive is not limited to bullets. According to Nikkei, Hua Hong recently informed Holtek, a Taiwanese supplier of microcontrollers, that he may not be able to give it more production capacity in 2022 than in 2021 due to the need to prioritize mainland Chinese customers. The foundry warned it would have to cancel some overseas orders due to supply shortages, citing China’s national policy of prioritizing demand from domestic chip designers. China has reportedly put in place a program to strengthen local supply chains. Hua Hong and SMIC, two Chinese contract chip makers, use proven process technology to manufacture the majority of their integrated circuits. Its 90nm production technique for low power, mixed signal logic applications is the most advanced node. SMIC, on the other hand, has 14nm and 28nm technology in its portfolio, but thicker nodes account for 82% of its revenue.
While neither of the two companies make complex high-end processors for international customers, they produce a large number of small, inexpensive microcontrollers that are used in virtually everything these days. Global restrictions on chip supply could intensify and weaken the global supply of electronics if they curtail supply to overseas customers to prioritize demands from local chip designers. Hua Hong and SMIC, two Chinese contract chip makers, use proven process technology to manufacture the majority of their integrated circuits. Its 90nm production technique for low power, mixed signal logic applications is the most advanced node. SMIC, on the other hand, has 14nm and 28nm technology in its portfolio, but thicker nodes account for 82% of its revenue.

While neither of the two companies make complex high-end processors for international customers, they produce a large number of small, inexpensive microcontrollers that are used in virtually everything these days. Global restrictions on chip supply could intensify and weaken the global supply of electronics if they curtail supply to overseas customers to prioritize demands from local chip designers. “Our power supply has been stabilized,” a multinational company with capacity in China told Nikkei, “but we were trying to negotiate with government authorities on our power supplies by the end of September.” “On the other hand, several major Chinese suppliers, such as Luxshare, were exempt from power outages from the start.”

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