The U.S. Department of Commerce last week directed a number of chip equipment vendors to stop shipping certain tools and materials to Hua Hong, China’s second-largest chipmaker, according to two people familiar with the matter.
The Commerce Department sent letters to at least a handful of companies notifying them of new restrictions on equipment bound for Hua Hong facilities that U.S. officials believe could be used to produce China’s most advanced chips, the sources said. Those people said leading U.S. equipment suppliers Lam Research, Applied Materials and KLA were among the firms believed to have received such letters.
Sources said the letters are intended to cover shipments not only to Hua Hong’s own fabs but also to Huali Microelectronics, the group’s contract chipmaking business. Huali was reported to be preparing a 7-nanometer chipmaking process at its Shanghai plant, according to the sources. The same reporting noted that SMIC, China’s largest contract chipmaker, remains the only domestic company currently capable of producing chips with 7-nanometer technologies.
Officials told the companies the restrictions apply to tools and other materials that U.S. authorities judge could facilitate the manufacture of China’s most sophisticated chips. The steps are consistent with a broader Commerce Department effort in recent years to limit shipments of advanced equipment to Chinese factories producing advanced chips, policies the department says are designed to protect U.S. leadership in the production of AI and other advanced semiconductors on national security grounds.
One of the people familiar with the matter said U.S. equipment makers and other suppliers could stand to lose billions of dollars in sales if the restrictions persist, particularly when shipments are destined for fabs that are still under construction or are in the process of retooling to make more advanced chips. The potential revenue impact rises when equipment orders are intended for plants transitioning to higher-end manufacturing nodes.
While the new restrictions could slow China’s domestic drive to move up the semiconductor value chain, the sources cautioned Hua Hong may be able to substitute tools from foreign or Chinese suppliers for some of the barred U.S.-origin equipment.
The letters come at a sensitive moment in U.S.-China relations and could increase tensions ahead of a scheduled meeting between President Donald Trump and Chinese President Xi Jinping in Beijing in May, the people said.
A Commerce Department spokesperson declined to comment. Hua Hong did not immediately respond to a request for comment. Lam Research, Applied Materials and KLA did not immediately respond to requests for comment.
Context and immediate implications
- The measures reflect a continuation of U.S. export controls aimed at preventing the transfer of advanced chipmaking capabilities to Chinese chip fabs.
- Named U.S.-based equipment suppliers are significant vendors to China and could see material sales disruption if restrictions remain in place.
- Hua Hong’s contract arm Huali’s reported work on a 7-nanometer process is central to why shipments to its facilities are targeted.
The full scope and duration of the Commerce Department measures have not been publicly detailed by officials. The available information comes from two people with direct knowledge of the letters and the targets identified by U.S. authorities.