(Bloomberg) — Washington’s latest move to restrain Beijing from fostering its chipmaking industry is powering China’s semiconductor stocks as the US restrictions could fire up support for homegrown technology.
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China chipmakers were one of the few bright spots in the markets Wednesday after Bloomberg News reported that the US is pushing the Netherlands to ban ASML Holding NV from selling to China technology essential in making a large chunk of the world’s chips. That, as well as a better-than expected earnings, has spurred a rally in chip stocks in China, with investors seeing US restrictions accelerating sales for domestic companies as tech firms seek onshore substitutes.
Chinese semiconductor manufacturers Piotech Inc. and Kingsemi Co. surged at least 10% in trading in Shanghai, while Advanced Micro-Fabrication Equipment Inc. and NAURA Technology Group Co. led the gains on the benchmark CSI 300 Index. Gains by Bestechnic Shanghai Co. and Verisilicon Microelectronics Shanghai Co. helped send the tech-heavy Star 50 gauge up as much as 2.3%.
China’s chip industry is growing faster than anywhere else in the world, after US sanctions on local champions from Huawei Technologies Co. to Hangzhou Hikvision Digital Technology Co. spurred appetite for home-grown components. The latest envisioned curbs underscore how tensions between Washington and Beijing are transforming the $550 billion semiconductor industry — a sector that plays a role in everything from defense to AI and autonomous cars.
Read more: US Sanctions Help China Supercharge Its Chipmaking Industry
“The logic behind China semiconductor stocks has been that of homegrown products replacing imported machinery and chips,” said Shi Junbo, fund manager at Hangzhou XiYan Asset Management Co. “Even though the technology might not be as advanced, they will have to do, as the US in effect forces domestic manufacturers to have a larger market share.”
The sector-wide gain has also been bolstered by Advanced Micro-Fabrication’s preliminary earnings. The firm sees profits after non-recurring items rising by as much as 630% in the first half, after new orders rose 62% to 3.1 billion yuan, according to a filing late Tuesday.
The earnings are a beat, and show a significant improvement in margins from the first quarter, CICC analysts including Li Xuelai, wrote in a note, expecting “net-profit growth to accelerate from here, with new products to help the firm open up its market potential.”
The market was “pessimistic” about semiconductor earnings for the first half due to the impact of lockdowns and dampened consumer electronics demand, Shi said. “But now it looks less gloomy after nearly a month of market-lagging performance.”
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