TAIPEI (Taiwan News) — The leading Chinese chipmaker confirmed the rumor on Sunday (Oct. 4) that the U.S. is placing export restrictions on its suppliers and warned of a potential impact on its future operations, adding to a string of bad news for China's fledgling semiconductor industry.

The Financial Times reported in late September that a license is now required for American companies to ship controlled items to the Semiconductor Manufacturing International Corporation (SMIC), China's champion in the industry. The Shanghai-based company said in the letter that it will continue to communicate with U.S. authorities but admitted the action would dampens its business outlook.

Market analysis firm TrendForce observed that Taiwan remains the world's largest contract chip manufacturer with a market share of 65 percent, followed by South Korea's 16 percent and China's 6 percent, to which SMIC contributed 4 percentage points. The new export restrictions are likely to have a negative impact on China's advanced chip development and chip self-sufficiency goals.

China's chipmaker mania has grown over the past few years against the backdrop of Beijing's goal of technological self-reliance. Data shows that there were approximately 45,300 companies in China dedicated to chip production or design as of July 20, when several high-profile semiconductor projects were either halted or officially terminated.

China's chip sector is facing the dual crisis of the new American export restrictions and a capital chain rupture due to insufficient financial assessments and a lack of access to chip talent, among other reasons.

Many of China's semiconductor projects, backed by local governments and worth billions of RMB, were initially aimed to challenge Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea's Samsung. According to the latest issue of business magazine Outlook Weekly, a subsidiary of Chinese state-mouthpiece Xinhua, six of these projects have been halted or terminated over the past year, including the following: