China's largest foundry, SMIC, has once again sounded the alarm over potential material shortages, a significant signal of the sustained pressure from U.S.-led export controls.
While SMIC has voiced this concern before, its reiteration now is particularly timely because the operating environment has become tougher. For instance, U.S. authorities recently fined a major equipment supplier, Applied Materials, for shipments that reached SMIC affiliates. This action sends a chilling message to all suppliers to be extremely cautious, which translates into longer lead times and tighter availability of crucial tools and parts for SMIC.
Furthermore, the cost of raw materials is surging. The price of gallium, a critical mineral for chipmaking, has more than doubled since early 2025. This spike is a direct result of China's own export controls and global supply disruptions, creating a squeeze that hurts SMIC's bottom line. This is the very 'tight supply' risk SMIC is flagging, playing out in real-time.
The roots of this problem trace back to December 2020, when SMIC was first placed on the U.S. 'Entity List'. This was the starting point for all subsequent restrictions. Being on the list meant that obtaining U.S. technology—from advanced machinery to simple spare parts—required a hard-to-get special license.
Since then, the restrictions have only grown tighter and more coordinated. First, the U.S. expanded its rules in 2022 and 2023. Second, key allies joined the effort. The Netherlands, home to critical equipment maker ASML, restricted shipments of advanced tools. Japan followed suit, controlling 23 different categories of chipmaking equipment. Even Taiwan added SMIC to its own control list, creating a multi-layered web of regulations.
In conclusion, the challenge SMIC faces is not from a single, major sanction but from complex and persistent pressure on its entire supply chain. Even with its factories ready to produce, the company faces constant uncertainty over securing the essential equipment, chemicals, and spare parts needed to keep them running. This warning is a stark reminder that in the global semiconductor race, building a fab is only half the battle; securing the supply chain is the other, equally critical, half.
- Entity List: A list of foreign organizations that U.S. authorities have determined pose a national security risk. U.S. companies are restricted from exporting most items to these entities without a special license.
- Export Controls: Government regulations that restrict the sale and transfer of certain goods, software, and technology to foreign countries for reasons of national security, foreign policy, or economic protection.
- Gallium: A rare metal that is a critical component in manufacturing certain types of semiconductors, especially for high-performance chips used in communications and defense.