Beijing’s Micron probe propels rally in Chinese chip makers as US tech rivalry deepens

The CNI Chip Index, which tracks semiconductor-related stocks in Shanghai and Shenzhen, rose 5.2 per cent on Monday
Micron probe will open up new opportunities for China’s memory-chip industry, Essence Securities analyst Ma Liang says

China stock market

Jiaxing Li

Published: 3:02pm, 3 Apr 2023

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Chinese chip stocks surged after Beijing launched an investigation into US chip maker Micron, as investors bet the country’s bid for self reliance in the sector could boost the nation’s semiconductor firms.

The CNI Chip Index tracking semiconductor-related companies in Shanghai and Shenzhen jumped 5.2 per cent on Monday, the biggest gain since November. The gauge, compiled by a unit of Shenzhen Stock Exchange, tracks the 25 largest stocks in the sector including China’s largest chip maker Semiconductor Manufacturing International Corporation (SMIC), Giga Device and chip-equipment maker Naura Technology.

Central processing unit maker Ingenic Semiconductors jumped 12.7 per cent to 100.30 yuan in Shenzhen and Advanced Micro-Fabrication Equipment surged 11.1 per cent to 163.90 yuan in Shanghai. In Hong Kong, China’s biggest chip maker Semiconductor Manufacturing International Corporation (SMIC) advanced 7.5 per cent to HK$20 while peer Hua Hong Semiconductors rose 5.8 per cent to HK$36.75.

“The investigation into Micron opens up new opportunities for the domestic memory-chip industry,” Essence Securities analyst Ma Liang said in a research note on Sunday. Together with Japan’s export ban, the probe will be a catalyst for China to speed up the development of domestic alternatives, benefiting both chip manufacturers and chip-equipment makers, Ma said.

China’s internet watchdog has opened an investigation into US chip giant Micron. Photo: Reuters

China hit back at American chip firms for the first time on Friday, with the country’s top internet watchdog launching a cybersecurity review into Micron to “safeguard key information infrastructure supply chain security”. The US memory-chip giant said it was “cooperating fully” with the regulator, but analysts said it could be subject to “restrictive measures” if its products were found to have violated cyber securities.

The US company is now facing “the threat of increasing competition” as a result of significant investment in the semiconductor industry by the Chinese government and various state-owned or affiliated entities such as Yangtze Memory Technologies and ChangXin Memory Technologies, it said in its earnings result on March 29. In addition, the Chinese government may restrict the company from taking part in the China market or may prevent it from competing effectively with Chinese companies, Micron said.

Hong Kong stocks retreat from three-week high as China probes US chip maker

“They [Chinese regulator] did it to a US company in a semiconductor product segment where China has a relatively advanced domestic player, Yangtze Memory Technologies,” Woz Ahmed, managing director at consultancy Chilli Ventures said. The message is clear that Beijing will retaliate without risking too much, he said.

China has been boosting investment and rolling out measures to support the chip sector, where it has been hemmed in on all sides by the US and its allies, prompting the market to bet on further support from Beijing.

The CNI Chip Index has risen 14.7 per cent so far this year, outperforming the CSI 300’s 5.5 per cent year-to-date gain, according to Bloomberg data.

Still, Ahmed warned that the real cost of decoupling could get uglier than what the market expects.

As Western politicians are increasingly hawkish over China, Beijing feels it has to react to show it will not be bullied, Ahmed said.

“This cycle only makes things worse. The cost – not just in terms of money – is not yet due. But it will come one day.”