What is going on here?
Shares in China’s biggest semiconductor companies surged to their daily limits after the Chinese government released new guidelines to promote homegrown technology.
What does this mean?
On September 18, 2024, the shares of several Chinese semiconductor companies, including Shanghai Zhangjiang Hi-Tech Park Development and Shanghai Haipower Group, surged 10%. Sanhe Tongfei Refrigeration hit the 20% daily limit, while Shenyang Blue Yin Industrial Automation Equipment rose 10.7%. The surge follows the release of guidelines by the Ministry of Industry and Information Technology (MIIT) on September 9 to encourage government-affiliated organizations to use domestically produced technological equipment. In particular, the guidelines highlight the progress of domestic exposure equipment technology by recommending two Chinese-made models, demonstrating progress despite ongoing challenges.
Why should you care?
For markets: A boost from Beijing.
The government’s support for domestic technology has buoyed Chinese semiconductor stocks. Although the technology gap with international leaders is large, Beijing’s push for domestic industries to close the gap presents potential investment opportunities. However, the United States and its allies continue to restrict the entry of China’s semiconductor industry. export Exports of advanced equipment to China are on the rise, adding geopolitical risks to these investments.
The big picture: chipping away at your advantage.
China’s semiconductor ambitions face major obstacles, including an export ban that prevents it from buying cutting-edge equipment from ASML. While local companies such as Shanghai Microelectronics Equipment Co. Ltd. are making progress, the company’s most advanced lithography equipment is at least 15 years behind international standards. China’s efforts to close the gap highlight broader global shifts in technology sovereignty and industrial policy.
