Crisis as an opportunity: shares of Chinese chip manufacturers soared after the ban on supplies from TSMC

It is not for nothing that Chinese philosophers are credited with assessing a crisis as a moment of emergence of new opportunities. As soon as information appeared that TSMC would stop supplying advanced chips for the needs of Chinese customers from that day on, the Chinese stock “semiconductor” index approached a three-year high. Investors were inspired by the idea of ​​accelerating import substitution.

Image Source: SMIC

Let us recall that the day before it became known that the US Department of Commerce ordered the Taiwanese company TSMC to stop shipping chips for the AI ​​segment produced using 7nm and more advanced technologies to China from this Monday. Thus, American officials hope to block the supply channel for chips for computing accelerators, which could be used by Huawei Technologies, which has been under US sanctions for many years.

The CSI Semiconductor Index rose more than 6% today, reaching its highest level since December 21, 2021, as investors believed progress was inevitable among Chinese chip and core equipment makers amid tightening sanctions. Shares of China’s largest contract chip manufacturer, SMIC, rose more than 4% today. The CSI Integrated Circuits Index rose 5% to start the week. Analysts at Cinda Securities said the US move will force Chinese manufacturers to rethink supply chains and boost demand for advanced chip manufacturing equipment in China. The current situation will contribute to technological breakthroughs in the field of equipment for chip production and materials science.

It is generally accepted that SMIC is capable of producing 7nm chips for Huawei smartphones and computing accelerators using foreign-made equipment purchased before the restrictions were introduced. Already, the company is forced to redistribute priorities, focusing on the release of more strategically important chips for computing accelerators to the detriment of chips for smartphones. Sooner or later, Huawei will be faced with the need to replace worn-out foreign equipment with Chinese ones, and by that time the latter should be available on the market and provide the necessary technical parameters for the products manufactured on it.