Expanding Export Controls on Chinese Chipmakers
In a significant escalation of the ongoing technology dispute between Washington and Beijing, the United States Department of Commerce has ordered multiple American semiconductor equipment manufacturers to halt shipments of certain tools to Hua Hong Semiconductor, China’s second-largest chipmaker. The directive, issued late last week, specifically targets two of Hua Hong’s facilities and is widely seen as a preemptive strike against the company’s efforts to develop advanced 7-nanometer (nm) manufacturing capabilities.
The Straits Times reported that the Commerce Department utilized “is-informed” letters to communicate the new restrictions to at least a handful of companies, reportedly including industry heavyweights Lam Research, Applied Materials, and KLA Corporation. This regulatory mechanism allows the US government to bypass the lengthy, formal rule-writing process and quickly impose new licensing requirements on specific entities or technologies. The move mirrors similar actions taken in 2022 when the US restricted shipments of advanced AI chips and manufacturing tools to China.
Targeting Hua Hong’s 7nm Ambitions
The new restrictions are sharply focused on two specific Hua Hong facilities: Fab 6, located in Shanghai and currently producing 28/22-nm technology, and a facility designated as “8a,” which is believed to be under construction and is not publicly listed on the company’s website. The core concern driving the US action is the development of 7-nm chipmaking processes by Huali Microelectronics, Hua Hong’s contract manufacturing arm, at its Shanghai plant.
Currently, Semiconductor Manufacturing International Corporation (SMIC) is the only domestic Chinese company capable of producing chips using 7-nm technologies. However, Huali’s research and development into 7-nm processes at Fab 6 reportedly began last year, supported by SiCarrier, a state-backed entity with ties to Huawei. Huali had been planning to achieve an initial production capacity of a few thousand 7-nm wafers per month by the end of 2026. The US government’s intervention appears designed to disrupt this timeline and prevent a second Chinese foundry from achieving advanced node capabilities.
(Related: MATCH Act: US Senate Bill Aims to Tighten Chip Manufacturing Tool Exports to China)
The Huawei Connection
A critical factor in the Commerce Department’s decision is the reported collaboration between Hua Hong and Huawei Technologies, which remains on the US trade blacklist. Huawei has been seeking to diversify its supply chain and reduce its reliance on SMIC for advanced semiconductor manufacturing. According to industry sources, Huawei was planning to shift a portion of its artificial intelligence chip production from SMIC to Hua Hong, leveraging Huali’s developing 7-nm capabilities.
By cutting off the supply of critical American manufacturing tools to Hua Hong, the US aims to simultaneously stymie Hua Hong’s technological advancement and constrain Huawei’s ability to secure the advanced chips necessary for its AI ambitions. This dual-pronged approach underscores the strategic importance the US places on maintaining a technological edge in semiconductor manufacturing and artificial intelligence.
Economic Fallout for US Toolmakers
The Commerce Department’s directive had an immediate economic impact on Wall Street. Following the news, shares of major US chip equipment manufacturers declined significantly on April 28, 2026. Lam Research saw its stock drop by 3.1%, KLA Corporation fell by 4.7%, and Applied Materials tumbled by 5.8%. The sell-off reflects investor concerns over the potential loss of billions of dollars in sales to the Chinese market, which has historically been a major source of revenue for these companies.
While the restrictions are targeted at specific facilities, the broader implications for the global semiconductor supply chain are profound. US toolmakers are increasingly caught in the crossfire of geopolitical tensions, forced to navigate complex and rapidly changing export control regimes. The long-term financial health of these companies may depend on their ability to secure alternative markets or secure licenses for continued sales, though the latter appears increasingly difficult under the current administration’s strict stance on technology transfers to China.
(Related: Lithography Loophole: How China Moves towards Chip Self-Sufficiency Despite US Controls)
Geopolitical Tensions and Future Outlook
The timing of the “is-informed” letters is particularly sensitive, coming just weeks ahead of a highly anticipated meeting between US President Donald Trump and Chinese President Xi Jinping in Beijing scheduled for May. The new restrictions are likely to increase diplomatic friction and complicate negotiations on broader trade and security issues.
While the US action will undoubtedly slow China’s domestic chipmaking drive in the short term, the long-term effectiveness of such unilateral controls remains a subject of debate. Chris McGuire, a senior fellow for China and emerging technologies at the Council on Foreign Relations, noted, “This is an overdue and welcome first step from the Trump administration. But to have any effect, it must capture all shipments from US toolmakers, including from their overseas subsidiaries.” Furthermore, Hua Hong and other Chinese chipmakers are actively seeking to replace American tools with alternatives from domestic suppliers or companies in allied nations, accelerating China’s push for complete self-reliance in semiconductor manufacturing.