BEIJING–U.S. chip equipment suppliers are pulling out staff based at China’s leading memory chip maker and pausing business activities there, according to people familiar with the matter, as they rush to assess the impact of Commerce Department semiconductor export restrictions.
State-owned Yangtze Memory Technologies Co. is facing a freeze in support from key suppliers including
Lam Research Corp.
, the people said. The suspensions follow last week’s sweeping curbs imposed by the U.S. on China’s chip sector, ostensibly to prevent American technology from advancing China’s military power, though the impact might reach further into the industry.
The U.S. suppliers have paused support of already installed equipment at YMTC in recent days and temporarily halted installation of new tools, the people said. The suppliers are also temporarily pulling out their staff based at YMTC, the people said.
U.S. chip equipment manufacturers have dozens of employees stationed at YMTC’s factory. They play a crucial role in operating the factory and developing its manufacturing capabilities, as they bring in expertise on highly technical chip production tools, people familiar with the situation said. If the halt is extended, customers such as YMTC face being cut off from upgrades, maintenance expertise and future technology they need to develop chips.
YMTC, KLA and Lam Research didn’t respond to requests for comment.
While the moves might be temporary, they are immediate signs of business disruptions facing Chinese chip makers and U.S. technology suppliers as Washington escalates its efforts to stifle China’s emerging semiconductor industry. The U.S. export control measures, which restrict companies sending chips and chip-making equipment to China, are some of the broadest the U.S. has enacted against China’s semiconductor industry. They veer from previous actions that often targeted individual companies and a narrower subset of technology.
The new rules, announced Friday by the Commerce Department, add new license requirements for advanced semiconductors and chip-making equipment destined to a facility in China. Licenses for facilities owned by U.S. and U.S.-allied firms would be decided on a case-by-case basis, while Chinese-owned facilities would face a presumption of denial.
Some foreign companies in ally countries are expected to get exemptions to keep their China-based facilities running, with South Korea’s
the first to reveal such an approval on Wednesday.
U.S. tool makers are assessing what they need to do to comply with the new restrictions in working with Chinese clients, and the longer-term impact is still unclear, people familiar with the matter said.
American companies dominate certain areas of the global chip production equipment supply chain, with a combined share of 41%, while China’s is 5% or lower, according to a Boston Consulting Group analysis.
The Commerce Department’s measures are far reaching because they restrict the ability of “U.S. persons” to support the development or production of some of the most cutting-edge chips in China.
“U.S. persons” would include those with American passports and green-card holders as well as U.S. companies, said
a former Commerce Department official and a partner at Akin Gump Strauss Hauer & Feld LLP.
KLA is known for its testing equipment and Lam Research for etching machines. Another major American supplier to China’s chip industry,
Applied Materials Inc.,
produces tools including those that deposit layers of materials on wafer surfaces—all critical steps in producing chips. China, the biggest market for the three U.S. chip equipment suppliers, contributes around 30% of the companies’ revenues.
Share prices of Applied Materials, KLA and Lam Research have all dropped by more than 20% over the past month.
Applied Materials didn’t respond to a request for comment.
Beyond the broad new restrictions targeting China’s chip sector, the U.S. last week placed YMTC on a list of companies the Commerce Department is concerned about, called an unverified list. Companies on the list could be added to a more restrictive export blacklist if its concerns aren’t allayed.
Based in China’s central Hubei province, YMTC is a maker of flash memory chips used for storage and China’s largest maker of memory chips overall. It is responsible for about 6% of global memory output, according to market tracker TrendForce.
The company last year began shipping a type of advanced memory chip containing 128 layers, putting it within the scope of new U.S. restrictions. More layers allow a chip to store more data.
YMTC is controlled by the Hubei government and China’s national integrated circuit fund. Previously, it was a unit of Chinese chip conglomerate Tsinghua Unigroup Co., which in recent years has been heavily indebted and completed a yearlong asset restructuring in July.
—Asa Fitch contributed to this article.
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