Huawei's 7nm Chip "Plan B" Thwarted: U.S. Commerce Department Halts SMIC Shipments

According to Omdia Beating monitoring, last week the US Department of Commerce issued a prohibition letter to multiple chip equipment companies, demanding a halt to the shipment of specific equipment and materials to China's second-largest foundry, HSMC. Lam Research, Applied Materials, and KLA are all believed to have received the letter, with their stock prices dropping by 3.1%, 4.7%, and 5.8% respectively on Tuesday.

The Department of Commerce's concern is that HSMC's HSMC Microelectronics, a subsidiary of HSMC, is preparing for the 7nm process. Reuters previously exclusively reported in March that HSMC had initiated 7nm development at its Shanghai plant, aiming to achieve initial production capacity of thousands of wafers per month by the end of 2026. Currently, only SMIC in China has the 7nm mass production capability. Insiders revealed that Huawei is planning to transfer some of its AI chip production from SMIC to HSMC.

The Department of Commerce used the "is-informed" letter mechanism, which allows for the rapid imposition of licensing requirements without going through the standard rule-making process. Insiders said this move could result in US equipment manufacturers losing billions of dollars in sales, while HSMC may also consider replacing the equipment with domestic or other foreign alternatives.