SMIC, China’s Largest Chipmaker, Gains 7.4% Amid Pelosi’s Taiwan Visit
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SMIC, China’s Largest Chipmaker, Gains 7.4% Amid Pelosi’s Taiwan Visit

Chinese semiconductor stocks surged higher in the past two days, boosted by growing U.S.-Sino tensions following Nancy Pelosi's visit to Taiwan.
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The U.S.-China tensions over Taiwan have led to a sharp jump in shares of Chinese chipmakers as investors expect Bejing to bolster local companies developing their key technology amid an economic slowdown. The jump in chipmakers’ stocks comes right after U.S. House Speaker Nancy Pelosi visited Taiwan to show support for the island country in the face of China’s warnings of retaliation regarding the visit.

Pelosi’s Visit Likely to Worsen Sino-U.S. Tensions

Shares of Semiconductor Manufacturing International Corp (SMIC), China’s largest chipmaker by market cap, gained 7.4% amid growing Sino-U.S. tensions. The move up, which came just after Nanci Pelosi’s visit to Taiwan, suggests that investors are growing more confident that Bejing will support homegrown chip stocks after the country’s economy contracted significantly in the second quarter.

SMIC’s shares advanced 3.3% in Hong Kong, just a day after gaining 4.1%. Moreover, shares of Hua Hong Semiconductor and the city’s benchmark Hang Seng Index were also up 5% and 2.1%, respectively.

The stocks of Chinese semiconductor companies were also boosted by the ongoing dispute between China and the U.S., which intensified further after Pelosi landed in Taiwan. Her visit marked the first time a U.S. House speaker has visited the island country in 25 years.

The U.S. has been focused on impeding China’s growth in the semiconductor industry, giving utmost importance to chips for both economy and national security. Strategists believe that Pelosi’s visit is likely to exacerbate tensions and force China to support the development of its own chips.

“China’s focus on supporting its domestic semiconductor chip industry should be unwavering going forward, and heightened tensions with the US will only fuel the push further. Directionally, the US is likely to ramp up restrictions on exports of semiconductor production equipment to China.”

said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore.

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The U.S. Congress Approves a New Bill to Boost Semiconductor Market Growth

China has loudly criticized the sanctions the U.S. imposed on Chinese companies, restricting their access to innovative chipmaking technology. To that end, the U.S. Congress has recently approved the Chips and Science Act, a $280 billion package, $52 billion of which will be used to bolster the U.S. semiconductor industry.

But apart from that, the bill also prevents companies receiving federal subsidies from making any major investments to materially grow their chipmaking capacity in China or any other foreign country of concern for the following 10 years. While the bill was warmly welcomed by U.S. chipmakers, analysts believe that the terms of the legislation could ultimately make them choose between the U.S. and China.

China imposed a lockdown in a major district in Wuhan last month, restricting the movements of nearly 1 million people. The country’s stringent zero-covid policy and record-high global inflation have significantly impeded China’s economic growth, with its gross domestic product (GDP) dropping to just 0.4% in Q2 2022.

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Do you think the ongoing China-U.S. tensions will escalate further? Let us know in the comments below.

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