US efforts to block China’s access to advanced semiconductors have had mixed results thus far. While key exporters of chipmaking equipment like Japan and the Netherlands have joined Washington’s blockade, China is still attracting the vast majority of semiconductor-focused VC funds and has managed to scale up its output of 7nm chips. Additionally, the country debuted its first homegrown lithography machine at the end of 2023.
Reports now suggest China’s SMIC will soon miniaturize its processors down to just 5nm. That still trails the most cutting-edge chips made in neighboring Taiwan at 3nm, but China has shown in the past that they can acquire and reverse engineer TSMC products to advance their own industry on the mainland.
Related ETF & Stocks: Invesco China Technology ETF (CQQQ), iShares MSCI China ETF (MCHI), Semiconductor Manufacturing International Corporation (0981.HK)
Like most portions of China’s financial markets, shares in its tech sector have been slammed throughout the past couple of years. As an exhibit of the carnage, share prices of Invesco’s China Technology ETF (CQQQ) holdings have effectively been cut in half since the start of 2022. In addition to broader economic headwinds spoiling investor interest in the country’s equities, a concerted effort on behalf of the US and its allies to deprive China of the latest semiconductor and chip fabrication technologies has raised concerns that it might take decades for Beijing to regain the ground it is losing against other economies.
For several years now, MRP has continually highlighted the implementation of strict trade restrictions on chip tech and equipment in an effort to deprive China of cutting-edge semiconductors and and extreme ultraviolet (EUV) lithography machines, typically used to produce advanced 5 to 7 nanometer (nm) chips. Not long after export curbs were implemented, however, evidence emerged showing that China’s Semiconductor Manufacturing International Corporation (SMIC) had managed to quietly advance its semiconductor fabrication processes to include the production of 7nm chips, a big jump from…
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