SMIC, China’s largest chipmaker, faces new US sanctions affecting its supply chain.
The ongoing technology war between the US sanctions China chips has taken a new turn. Also, on September 12, 2025, the US government has banned two Chinese companies, GMC Semiconductor Technology (Wuxi) Co. Ltd. and Zhikun Semiconductor Technology Co. Ltd. And these companies are accused of helping China’s largest chipmaker Semiconductor Manufacturing International Corporation to obtain US semiconductor manufacturing equipment, which is part of a long strategy by the US to target China’s semiconductor industry. SMIC is already included in the list of US sanctions. Due to which it is facing difficulty in accessing US technology and equipment. But these new sanctions are aimed at closing the remaining routes of SMIC’s supply chain as well.
Details of sanctions
Sanctioned companies The US Department of Commerce has added GMC Semiconductor Technology and Zhikun Semiconductor Technology (Shanghai) to its entity list. Also the reason that these companies are accused of helping SMIC obtain semiconductor manufacturing equipment of US origin. SMIC was already facing restrictions due to US sanctions, and these companies worked to circumvent those limitations And the effect of the sanctions is that after being included in this list, it will be extremely difficult for US companies to export any technology or equipment to these two Chinese companies. To do this, they will have to obtain a special license from the US government, which is very unlikely to be received.
Other sanctions But Shanghai Fudan Microelectronics Co., Ltd. and its affiliates are also included in this list. The US alleges that this company is helpful in the militarization of China and has also provided technology to the Russian army.
Talking about the impact on SMIC
Despite these sanctions, SMIC has shown strong financial performance recently. And the company’s revenue grew 23.4% to 31.99 billion yuan ($4.47 billion) in the first half. This shows that SMIC has so far been successful in minimizing the impact of sanctions. Also strong domestic demand: The main reason for SMIC’s success is the rapidly growing demand in China’s domestic market. More than 84% of the company’s income now comes from China. Due to a strong strategy of ‘domestic substitution’ for chips, the demand for analog chips, WiFi and Ethernet chips, and memory controller chips remains very high.
Limited impact of tariffs SMIC co-CEO Zhao Haijun has said that the tariffs imposed by the Trump administration have not had a ‘hard landing’ effect on the company. Customers have already increased their inventory stock or found other suppliers, which has reduced the impact of tariffs. Also, the production capacity, which is SMIC’s production capacity is still insufficient and by October its capacity will be fully utilized, the company’s capacity utilization rate has reached 92.5%.
Impact on global semiconductor industry
This technological competition between the US and China is affecting the entire global semiconductor industry. Also, the disruption in the supply chain, which is the global supply chain has become even more complicated due to these steps of the US. Companies now also have to take care of political risk. And technological separation is increasing between the two countries. The US and its allies such as Taiwan, Japan, Netherlands are on one side. While China is insisting on developing its indigenous technology. Which impacts global innovation, which some experts believe that this competition can slow down the pace of global innovation in the long run. Because creating a dual supply chain leads to duplication and inefficient allocation of resources.
Future challenges and strategies on US sanctions China chips
There are many challenges facing SMIC and China’s semiconductor industry in the future. And but they are also making strategies to deal with them. Also lack of access to advanced equipment which will be extremely difficult for SMIC to mass produce at nodes of 5nm or beyond without access to advanced equipment like EUV lithography machines. Also access to global talent may make it difficult for Chinese companies to attract international talent due to restrictions. Uncertain geopolitical environment that any change in the relationship between the US and China could affect SMIC’s plans.
Emphasis on indigenization China is investing heavily in making its semiconductor industry self-reliant with indigenous technology under schemes like ‘Made in China 2025’. Developing alternative suppliers China is working on developing its own semiconductor equipment manufacturers and getting technology from other non-US sources. But focusing on mature nodes: SMIC can still make a strong market on older less advanced nodes like 28nm and 14nm. Because these chips are in huge demand in cars and IoT devices.
Conclusion: US sanctions China chips
The sanctions imposed by the US on two Chinese companies that supply equipment to SMIC are the latest link in the battle for global technological supremacy. But these sanctions show that the US is willing to take every possible measure to keep China’s semiconductor industry behind. But SMIC’s recent strong financial performance and its strong presence in China’s domestic market are a major reason for this. The rapidly growing demand in the US suggests that these sanctions have had limited immediate effect.
This conflict is likely to continue in the future. China is fully committed to achieving its technological self-sufficiency, while the US and its allies want to maintain their technological advantage. And the outcome of this competition will deeply affect not only the future of both countries but also the global technological landscape. This technological race between the world’s two largest economies will determine the direction of the next decade.
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