A reappraisal of China's semiconductor strategy

• Chinese technology giant Huawei has enough inventory to sustain its smartphone and 5G networking equipment business for most of the rest of the year, investment group CLSA predicts.
• Huawei subsidiary HiSilicon, which designs chips for Huawei equipment, has been increasing its capability in the last few years, and is able to supply 80% to 90% of Huawei’s needs, according to Sebastian Hou, investment analyst at CLSA.
• But Huawei’s survival is ultimately dependent on Taiwanese chipmaker TSMC, CLSA said.

vincent said:

Another case of reporter have no freaking clue what he's talking about

Only the phone's SOC's need the most advance tech from TSMC. Vast majority of chips are still on older nodes which other companies in China are capable of manufacturing

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Totoro said:

Military action against anyone would be absolutely the wrong move for China. Something like that would play right into US hand, as it'd turn pretty much everyone against China.

If China wants to pressure Taiwan, it may try to do so economically. Taiwanese exports to China and Hong Kong make up something like 40% of their total exports. Blocking that overnight would hurt China but would hurt Taiwan much, much more.

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• The sudden move comes as Washington steps up efforts to cut off US technology from China

China’s biggest maker of semiconductors is to withdraw from the New York Stock Exchange, bringing to an end its 15-year listing in the US, as the increasingly ferocious trade war with the US spills over into the technology sector.

Semiconductor Manufacturing International Corp (SMIC) said on Friday evening it has notified NYSE of its intention to apply on June 3 to delist its American depositary receipts from the bourse. In a filing to the Hong Kong stock exchange, where its shares are listed, SMIC cited low trading volumes of its ADRs and the high costs of maintaining the listing and complying with reporting requirements and related laws.

The delisting is expected to happen after June 13, and trading of the chip maker’s US securities will shift to the over-the-counter market, the statement said. The board has already approved the proposal, it said, though SMIC will require permission from the Securities and Exchange Commission (SEC) too.

Investors were caught off-guard by the announcement. The chip maker’s ADRs tumbled by around 5 per cent in pre-market trading in the US. Its Hong Kong-listed shares dropped 4.3 per cent to HK$8.42 at the close on Friday.

The sudden move came at a time when Washington is stepping up efforts to cut off its technology from China, with trade negotiations between the world’s two largest economies still deadlocked.

The Trump administration has put Huawei Technologies, China’s biggest telecoms equipment maker, on its so-called entity list that will virtually ban the company from buying key American technologies and products. The sanction may be expanded to include as many as five Chinese video surveillance companies including the largest, Hangzhou Hikvision Digital Technology, and Zhejiang Dahua Technology, according to media reports.

In an attempt to combat such moves, China has ratcheted up its policy support of its home-grown chip industry to reduce the sector’s reliance on imports. Following an announcement from the finance ministry this week, Chinese integrated circuit makers and software developers will be exempt from paying corporate taxes for two years starting in 2019, and the tax rate will be halved in the next three years.

SMIC is backed by the Chinese government, with state-owned enterprises or state-linked investment funds as the major shareholders. The China National Integrated Circuit Industry Investment Fund, which was created by the government in 2014 to bolster the development of home-grown technologies and acquire overseas patents and designs, has invested in SMIC through an investment arm.

SMIC’s shares started trading in Hong Kong and the US at the same time, in March 2004. Its Hong Kong-traded shares have advanced 23 per cent so far this year, well ahead of a 5.8 per cent gain on the Hang Seng Index in the same period. Its revenues increased 8.3 per cent from a year earlier to a record high of US$3.36 billion in 2018.

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Shanghai’s upcoming Technology Innovation Board on Friday green lit the initial public offering applications of nine technology companies. The board, ordered by Chinese President Xi Jinping in November, began accepting listing documents on Monday and allowed the firms to proceed with their application process after a five-day review process.

The board, a Nasdaq-style market, also started a countdown to its trading debut, with regulators expecting to launch it in mid-2019. The companies given the go-ahead are from the fields of basic science, robotics, new material and chip making, with no e-commerce or internet-related firms in the running.

Amlogic, which focuses on designing integrated circuits, was the new technology board’s first IPO applicant.

“The companies show that the new board will aim to boost the real economy and help China to enhance its manufacturing might,” said Cao Hua, a partner at private equity firm Unity Asset Management. “To ensure initial success on the board, the first nine firms selected have solid fundamentals.”

The average market capitalisation of the chosen companies, which also include Beiren Robot, HeJian Technology (Suzhou) and Wuhan Keqian Biology, is estimated at 7.28 billion yuan (US$1.08 billion), the Shanghai Stock Exchange said in a statement.


The China Securities Regulatory Commission will allow a wide range of technology companies, including unprofitable firms, pre-revenue biotechnology start-ups and foreign-funded mainland businesses using variable interest entities structures, to raise funds on the new board.

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Peter2018 said:

If they decide to do that, military action will take place. Sometimes unexpected things will happen, faster than we anticipate.

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