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The chip industry is facing 'major uncertainty' as global tensions rise

Lisa Micheal 8 Aug 29
Integrated circuits on a circuit board. The semiconductor industry has been in focus during the U.S.-China trade war.

The semiconductor industry is facing a "profound" threat from geopolitics, according to the president of industry association SEMI China, Lung Chu.

The sector is already seeing a slowdown in the midst of challenges such as inventory issues, slowing demand for smart devices and falling memory chip prices. Now, the tensions between the U.S. and China threaten to worsen the situation.

"The geopolitical risk is a major uncertainty," Chu told CNBC's "Street Signs" on Thursday.

He said the technology control as well as export restrictions on Chinese tech giant Huawei "could have a more profound impact to the industry, fundamentally changing even the global supply chain."

The U.S. and China have been locked in a trade war for more than a year now.

In May, Washington placed Huawei on a blacklist that prohibits American firms from doing selling parts to the Chinese telecommunications giant without permission. Shortly after, the U.S. offered Huawei a 90-day reprieve and allowed U.S. businesses to continue selling limited products to the Chinese telecom. That deadline was extended by another 90 days in August.

It would be a major impact to the U.S. companies if they cannot sell to Huawei.

This week, the U.S. Commerce Department reportedly received more than 130 applications from companies requesting to sell U.S. goods to Huawei — no licenses have been granted yet, the report said.

In the event that it is denied access to U.S. firms, such as Qualcomm and Intel, Chu said: "The slowdown will get worse."

Huawei is the third largest chip buyer in the world, Chu said, adding that damage could extend to the U.S. itself, as American firms dominate the semiconductor industry.

"Even if you include memory (chips), the U.S. (companies) control about 50% of the global semiconductor markets," Chu said. "If you take memory out, that's even more than probably 60, 70%."

"It would be a major impact to the U.S. companies if they cannot sell to Huawei," he added.

In the long run, this could wind up benefiting non-U.S. companies if they don't comply with Washington's restrictions, Chu said. Huawei already conducts its own internal development and will likely accelerate the process.

Still, the Chu expressed hope of seeing a return to global cooperation.

"I still believe in a global collaboration as a way to move the industry forward," he said. "Politics divide, but technology unite(s), and I think this is a lesson that we can all learn."