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Investing.com-- Chinese chipmaking shares advanced on Monday as a growing feud between Beijing and Taipei over recent export controls on the mainland fueled bets on more government support for the sector.
Local chipmaking stocks were also buoyed by general optimism towards technology shares, especially after strength in tech helped Wall Street hit record highs on Friday.
Semiconductor Manufacturing International Corp (SMIC) (HK:0981), China’s biggest chipmaker by volume, rose nearly 3%, while Hua Hong Semiconductor Ltd (HK:1347) and NAURA Technology Group Co Ltd (SZ:002371) rose between 2% and 3%. Chipmakers largely outpaced a middling performance by broader Chinese stock markets.
China over the weekend decried Taiwan’s decision to impose export restrictions on hundreds of Chinese companies, including Huawei and SMIC, with Beijing vowing measures to ‘defend its economic and technological interests,’ local media reports showed.
The threatened measures could entail more military action, and could also include stricter rare earth exports to Taiwan, along with restrictions on Taiwanese companies operating in the mainland.
But China is also expected to introduce more support for the domestic chipmaking industry, especially as it moves to build out the sector to further reduce the country’s reliance on foreign chip technology.
Taiwan’s export restrictions, which were outlined earlier in June, came after Huawei allegedly acquired chips produced by TSMC using one of its advanced fabrication technologies– a move that is blocked under U.S. sanctions.
The U.S. had over the past five years introduced increasingly stricter restrictions on chip sales to China, with the latest round of restrictions, under President Donald Trump, essentially cutting off the country from a bulk of artificial intelligence technology.
But Chinese companies were seen remaining competitive in the AI sector despite U.S. restrictions. Beijing’s backing of its domestic chipmaking industry also saw majors such as Huawei develop AI chips that compete with majors such as Nvidia (NASDAQ:NVDA), while SMIC rose to become the world’s third-largest contract chipmaker by volume.