China's Chip Index Approaches 3-Year High

In today's trading, China's semiconductor index surged to near a three-year high, fueled by expectations that the U.S. decision to halt advanced chip shipments from Taiwan Semiconductor Manufacturing Co. to Chinese customers could accelerate Beijing's self-sufficiency efforts. The CSI Semiconductor Index rose by more than 6% during trading on Monday, reaching its highest level since December 20, 2021, while the CSI Integrated Circuit Index increased by 5%. Analysts noted that this move could pose short-term challenges for Chinese firms designing chips for artificial intelligence accelerators and graphics processing units, but it could benefit the domestic chip production sector since companies will have few alternatives. Shares of SMIC, China's largest foundry and the main alternative to TSMC, rose by more than 4%. Chinese brokerage Cinda Securities stated, "In the medium to long term, this will force a reorganization of the supply chain, increase demand for local advanced process manufacturing capacity, and stimulate technological breakthroughs in upstream semiconductor equipment and materials."