China’s semiconductor index moved closer to a three-year high on Monday due to the U.S. decision to halt shipments of advanced chips from Taiwan Semiconductor Manufacturing Co. to Chinese customers, which could accelerate Beijing’s autonomy efforts.
TSMC will suspend deliveries of some sophisticated chips to some Chinese customers starting Monday after receiving a letter from the U.S. Department of Commerce imposing export restrictions on those products, Reuters reported on Sunday.
Analysts say that while the move is likely to cause short-term difficulties for Chinese companies that design chips for artificial intelligence accelerators and graphics processing units, it could benefit the domestic chipmaking sector, because businesses will have few alternatives.
The CSI Semiconductor index jumped more than 6% on Monday, reaching its highest level since December 20, 2021, while the CSI Integrated Circuits index advanced 5%. Shares of SMIC, China’s largest foundry and the leading alternative to TSMC, rose more than 4%.
“In the medium to long term, this will force supply chain reorganization, increase demand for domestic advanced process production capabilities, and encourage technological breakthroughs in upstream semiconductor equipment and materials,” said Chinese brokerage Cinda Securities in a note published on Sunday.
Several Chinese technology companies and chip designers have sought in recent years to design their own advanced processors after the United States sanctioned Huawei Technologies and banned companies like Nvidia and AMD from selling their most sophisticated chips to China.
Many rely on TSMC, the world’s largest contract chipmaker based in Taiwan, for production. In the third quarter, 11% of TSMC’s revenue came from China, the company said.
The United States has imposed export restrictions on TSMC chips of 7 nanometers or more advanced designs, according to Reuters.
The only Chinese foundry capable of producing 7nm chips is SMIC, known for helping Huawei produce chips used in its latest smartphones, including the Mate 60 and Pura 70.
According to analysts, SMIC manufactured these advanced chips using equipment provided by companies like ASML (Netherlands) and Applied Materials (United States), which it managed to stockpile before the entry into force American sanctions.
However, SMIC has encountered difficulty increasing production due to U.S. export controls that prevent it from purchasing the equipment needed to manufacture advanced chips, while domestic alternatives are not yet ready for this. effort.
Reuters reported in February that due to manufacturing constraints, SMIC had to prioritize the production of artificial intelligence chips for Huawei over smartphone chips, with the former considered more important. a strategic point of view.
