Shares in Chinese chip makers are plummeting as investors fear heightened tensions with the US could stifle the sector’s growth despite Beijing’s efforts to become self-sufficient.
Image Source: Pixabay
The FactSet indicator, which tracks national chip-related firms, fell more than 5% on Friday, cutting annual gains to 15%. This sector has come under the spotlight due to growing tensions between China and America because semiconductors are needed by everyone from smartphones to artificial intelligence and military equipment. With President Joe Biden set to sign an executive order soon to limit investment in key high-tech sectors, investors are wondering if Beijing’s policies can outweigh such obstacles and allow the IT sector to grow further.
Roxy Wong, senior portfolio manager at BNP Paribas Asset Management, said the sanctions “will require Chinese chipmakers to develop their own ecosystem, which will be quite difficult, but they will have to do it. This will encourage Chinese manufacturers to make further investments to try to develop the technology and perhaps make a breakthrough in this direction.”
The US is increasingly restricting the export of advanced chips to Chinese customers, and is also seeking to blockade key hardware manufacturers such as ASML Holding NV from the Netherlands. The Biden administration will try to garner international support during the G-7 summit next month, according to people familiar with the matter.
Current events are spurring Beijing’s drive towards self-sufficiency, and the authorities are encouraging the expansion of local chip manufacturing capacity and accelerating the transition to local equipment. The country is also giving some firms easier access to subsidies and more control over government-supported research.
If you notice an error, select it with the mouse and press CTRL + ENTER.
