U.S. Restrictions Could Boost China’s Domestic Chip Technology

Washington’s move to restrict China from bolstering its chipmaking industry is helping the country’s semiconductor company stocks to rise as the U.S. measures could fire up support for homegrown technology. The U.S. is urging the Netherlands to ban ASML Holding from selling China technology essential to make a large chunk of the world’s chips.

The U.S.’ move, as well as better than expected earnings, helped chip stocks in China to rally. Investors consider U.S. restrictions accelerating sales for domestic companies as technology firms seek onshore substitutes.

Chinese chipmakers Piotech and Kingsemi shares rose at least 10% in trading in Shanghai, while Advanced Micro-Fabrication Equipment and NAURA Technology Group led the gains on the benchmark CSI 300 Index. Bestechnic Shanghai and Verisilicon Microelectronics Shanghai also helped send the tech-heavy Star 50 gauge up as much as 2.3%.

China’s chip industry is growing faster than anywhere in the world, particularly after the U.S. imposed sanctions on tech giants Huawei and Hangzhou Hikvision Digital Technology. The U.S. measures spurred appetite for China produced 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.

The industry wide gains have also been boosted 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. The earnings show a significant improvement in margins from the first quarter.

The market was not hopeful about semiconductor earnings in the first half due to the impact of lockdowns and dampened consumer electronics demand. But it looks less gloomy now after nearly a month of market-lagging performance.

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