SMIC’s, Semiconductor Manufacturing International Corporation, stock price soared over the course of two months… with the stock doubling in value. Why? Technological nationalism is why. SMIC is benefiting from China’s attempt to become self reliant when it comes to semiconductors.
Shanghai-based Semiconductor Manufacturing International Corp. (SMIC) is the second-largest pure-play foundry in the world after TSMC, and its stock price has been going on a rally in the past two months, doubling its value. Bloomberg says that China’s push for semiconductor self-reliance fuels this demand, and with U.S. sanctions making it harder for local companies to acquire chips with Western parts, they’re turning to local companies like SMIC for their needs. Aside from this, China is also investing billions of dollars into its semiconductor industry, and SMIC is benefiting from it.
However, despite its burgeoning semiconductor manufacturing industry, China still lags behind the Western world in cutting-edge chips and AI, primarily due to Washington’s moves. For example, it cannot access ASML’s latest High-NA EUV machines, preventing Chinese firms from producing the nodes required for next-generation processors. And despite SMIC’s focus on legacy chips used in industrial processes and automobiles, a move that a Chinese chip industry leader recommended, some experts say competition in this space may get fiercer next year, as other local chip fabs, and even TSMC, could lower their prices, making their offerings more attractive to customers and reducing SMIC’s advantage.
SMIC is basically China’s semiconductor champion just like Rapidus is basically Japan’s champion and Intel is unfortunately America’s champion… all three are looking to be on the very edge of semiconductor manufacturing technology and all three are steadfastly behind TSMC on that front.
TSMC is beating all three on virtually every measure you can come up with and that’s kind of sad. However the effects of tech nationalism will begin to be felt relatively soon. Rapidus and the semiconductor ecosystem in Japan are getting a cash infusion, Intel and the semiconductor ecosystem in the United States is getting a cash infusion, and China is working to help their semiconductor industry across the board.
I kind of wonder whether or not SMIC is actually a good investment. China is not going to completely concentrate its semiconductor ecosystem with one firm. And even if China weans itself off of TSMC product the Chinese Communist Party will probably not let SMIC have excess profits. SMIC is a dubious investment.
But this is again about tech nationalism. China is doing its best to do what the United States is doing and that’s become self reliant when it comes to the manufacture of semiconductors. This is what’s helping SMIC out. You’d think Intel would get helped out as well by this tech nationalism but so far the Biden Administration and Congress have been less than helpful.
Ultimately this is a new phase in industrial policy and nobody knows just how it’s going to work out. But regardless it needs to happen. The United States cannot continue to rely on Taiwan for its semiconductors and it cannot continue to let China catch up to its technological leadership. In our current world, technological power is what will make or break a war. Without that power you will surely lose.
Anyway, expect SMIC to continue to rise, both in the stock market and in the manufacture of semiconductors.