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ACLS - Axcelis Technologies Inc News Story

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Sector
Technology
Size
Mid Cap
Market Cap £970.0m
Enterprise Value £858.3m
Revenue £341.3m
Position in Universe 2575th / 6849

EXCLUSIVE-U.S. suppliers to Chinese chip giant SMIC slow to get export licenses

Thu 4th March, 2021 11:00am
By Karen Freifeld and Alexandra Alper
    March 4 (Reuters) - The U.S. government has been slow to
approve licenses for American companies like Lam Research and
Applied Materials to sell chipmaking equipment to China
semiconductor giant SMIC, even as a global shortage has
supercharged chip demand, several sources said.
    Licenses for U.S. suppliers to ship much of an estimated $5
billion dollars' worth of parts and components still have not
come through, industry sources said, though many companies
sought them soon after the company was blacklisted in December.
Certain licenses have been granted, including for small numbers
of expensive equipment in recent days.
    As policy shifts under President Joe Biden, who took over
from Donald Trump in January, U.S. government agencies led by
new appointees still haven't completely decided what should be
sold to Semiconductor Manufacturing International Corp, which
produces chips for Qualcomm and other American companies. 
    The Trump administration placed SMIC on the U.S. Department
of Commerce's entity list over concerns of SMIC aiding China's
military.
    The listing, which requires U.S. suppliers to get a license
before shipping goods to SMIC, is unusual because it says most
products should be granted on a case-by-case basis. However,
equipment that can be used to make only the most advanced, 10
nanometer and smaller chips is likely to be denied licenses.
    The administration is supposed to make decisions on license
applications within a month, but follow-up questions stop the
clock.
    "Lam Research is still in the application process and has
not yet received a response," a Fremont, California, company
spokeswoman said on Wednesday.
    Applied Materials' chief financial officer said in a
February 18 earnings call that their forecast did not assume
licenses would come through. A spokesman for the Santa Clara,
California based company declined comment on the licenses this
week, including whether the comment was still valid.
    SMIC did not respond to requests for comment, but the
company has said it provides services solely for civilian and
commercial end users and that it has no ties to the Chinese
military. 
    Decisions on licenses have been held up as officials ask
follow-up questions about applications in part to determine
whether the parts or components could be diverted for use in
producing items 10 nm or smaller, sources said.
    Washington trade lawyer Giovanna Cinelli said many license
applications have resulted in "a lot of back and forth, which
has elongated the period of review." 
    In a statement, a Commerce Department official dismissed the
possibility that curbs on SMIC could contribute to the chip
shortage, noting that the shortfall was tied to older
technologies while SMIC restrictions relate to leading edge
technology. The statement did not address the potential impact
of delays in licenses for older technology.
    SMIC, the largest foundry in mainland China, is an important
player in the global semiconductor supply chain, which is under
pressure as pandemic lockdowns drive up demand for electronics
such as laptops and phones. Last month, it said it could not
meet customer demands for certain technologies and its plants
have been running "fully loaded" for several quarters.
    SMIC's technological capabilities lag far behind
cutting-edge foundries like industry leader Taiwan Semiconductor
Manufacturing Co 2330.TW , according to industry sources.
    Companies like Applied Materials and Lam Research, two key
suppliers of production equipment, submitted numerous license
applications to sell to the company. The bulk have not yet been
acted on, industry sources said. 
    A spokeswoman for Entegris, a Massachusetts company that
submitted license applications to sell to SMIC, told Reuters
late Wednesday that it had received its first license within the
past week.
    Other companies that ship to SMIC include California's KLA
Corp and Axcelis Technologies in Massachusetts. A KLA
spokeswoman declined to comment on licenses, and while Axcelis's
CEO spoke of "uncertainty" related to its licenses on Feb. 11th,
a company spokeswoman declined to provide an update.
    Qualcomm, which uses the Chinese foundry to produce chips
with decades-old technology, put in applications for tools SMIC
needs to produce them, just in case equipment makers don't get
theirs, an industry source said. But they have not come through
yet, the source added.
    In September, SEMI, a worldwide industry group, said in a
draft letter seen by Reuters that SMIC accounts for as much as
$5 billion in annual U.S. sales.



 (Reporting by Karen Freifeld and Alexandra Alper; Editing by
Chris Sanders & Shri Navaratnam)
 ((karen.freifeld@thomsonreuters.com; +1(646) 223-6921;))
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