SHANGHAI (Reuters) – China’s semiconductor index hit a three-year high on Monday on bets that a U.S. order halting shipments of Taiwan Semiconductor Manufacturing Co chips to Chinese customers could accelerate Beijing’s confidence-building efforts.
TSMC from Monday will stop exporting some high-end chips to some Chinese customers after receiving a letter from the US Commerce Department imposing export restrictions on those products, Reuters reported on Sunday.
Analysts say that while the move may cause short-term pain for Chinese companies involved in the production of chips for artificial intelligence accelerators and graphics processing units, it could benefit the domestic chipmaking industry as companies will have fewer alternatives.
The CSI Semiconductor Index jumped more than 6% during trading on Monday to its highest since December 20, 2021, while the CSI Integrated Circuits Index rose 5%. Shares in SMIC, China’s largest and the country’s alternative to TSMC, rose more than 4%.
“In the medium to long term it will force the restructuring of the supply chain, increase the demand for domestically advanced manufacturing capacity, and spur technological breakthroughs in high-end machinery and materials,” Chinese broker Cinda Securities said in a paper published on Sunday. .
Many Chinese technology companies and chip designers have in recent years sought to design their own advanced processors after the US sanctioned Huawei Technologies and banned the likes of Nvidia and AMD from selling their most sophisticated chips in China.
Many rely on Taiwan-based TSMC, the world’s leading contract chipmaker, for production. In the third quarter, 11% of TSMC’s revenue came from China, the company said.
The US has imposed export restrictions on TSMC’s 7-nanometer chips or more advanced designs, Reuters reported.
The only site in China capable of producing chips on the 7 nm process node is SMIC, which is known for helping Huawei produce the chips used in its latest smartphones, including the Mate 60 and Pura 70.
Analysts say SMIC has been making such advanced chips using equipment provided by companies such as the Netherlands’ ASML and US-based Applied Materials, which it was able to collect before the US sanctions began.
However, SMIC has faced difficulties in ramping up production due to US export controls that prevent it from purchasing the equipment needed to produce advanced chips, while domestic alternatives are not ready for the effort.
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