What are semiconductor export restrictions and why do they matter?

Export restrictions are government policies that limit the sale of certain technologies to specific countries. In this case, the U.S. has restricted sales of advanced AI chips to China for national security reasons. These restrictions create opportunities for domestic Chinese companies to fill the gap left by international competitors, potentially leading to significant market share gains.

How do trade tensions affect semiconductor companies?

Trade tensions can both challenge and benefit semiconductor companies depending on their position. International companies may lose access to large markets like China, whilst domestic Chinese firms may gain opportunities to capture market share previously held by foreign competitors. This creates a complex investment landscape with both risks and opportunities.

What does 'technological self-sufficiency' mean for China?

Technological self-sufficiency refers to China's strategic goal of reducing dependence on foreign technology by developing domestic alternatives. This includes building local semiconductor design and manufacturing capabilities. For investors, this represents a massive government-backed initiative that could drive significant growth in Chinese tech companies.

What is a semiconductor foundry?

A semiconductor foundry is a factory that manufactures chips designed by other companies. Think of it as a specialised manufacturer that takes chip designs and turns them into physical products. Companies like Taiwan Semiconductor Manufacturing (TSM) are foundries that produce chips for many different technology companies worldwide.

What does 'market cap' tell me about a company?

Market capitalisation (market cap) is the total value of a company's shares in the stock market. It's calculated by multiplying the share price by the number of shares outstanding. A higher market cap generally indicates a larger, more established company, whilst a lower market cap might suggest a smaller company with potentially higher growth prospects.

15 handpicked stocks

China's Semiconductor Ascent

Nvidia is currently in discussions with the U.S. government to sell less powerful AI chips to China due to ongoing export restrictions. This sustained trade tension creates a significant opening for domestic Chinese semiconductor companies to capture market share and accelerate their growth.

Han Tan | Market Analyst

Updated today | Published at August 29