-- Shares of SMIC sank on Friday, leading declines across major Chinese technology firms after the Biden administration suggested that China’s biggest chipmaker may have flouted U.S. export curbs to produce a new chip for a flagship Huawei phone. 

A top U.S. Commerce Department official said during a congressional hearing on Thursday that SMIC, formally known as Semiconductor Manufacturing International Corp (HK:), may have illegally obtained U.S. chipmaking technology to manufacture the chip, although officials were still investigating the matter. 

His comments sparked renewed uncertainty over more potential curbs against Chinese companies- a trend that has been steadily gaining traction as government officials also called for a ban on popular social media app TikTok. 

The Biden administration had tightened its export curbs on Chinese chipmakers in 2022 and 2023, with its latest round of restrictions- enforced in mid-2023- aimed at denying the country access to the latest developments in artificial intelligence. AI giantNVIDIA Corporation (NASDAQ:) can no longer sell its most advanced chips in China. 

Huawei is also a contentious topic for U.S. lawmakers, after the Trump administration blacklisted the firm in 2019 over ties to the Chinese military. Similar actions were taken against SMIC in 2020, although both firms denied such ties. 

Chinese tech rattled by sanction fears

SMIC slid over 5% in Hong Kong trade, while peers Group Co Ltd (HK:) and (HK:) fell more than 3% each.

Losses in chipmakers spilled over into broader technology stocks, with internet giants (NYSE:) (HK:), (HK:) and Tencent Holdings (HK:) losing between 2% and 4%.

This sparked a 2.9% slump in Hong Kong’s index, while losses in mainland-listed tech saw China’s and slide more than 1.4% each. 

SMIC losses present buying opportunities elsewhere 

But the prospect of more U.S. action against SMIC presented opportunities for other China-based chipmakers, who could step in to fill a potential supply gap in Chinese semiconductor markets. 

NAURA Technology Group Co Ltd (SZ:) and Hygon Information Technology Co Ltd (SS:) were seen as the two main candidates for such a trade. Their shares rose 4.2% and 0.1% on Friday, respectively.