China’s chip industry is growing faster than anywhere else in the world, after U.S. sanctions on local champions from Huawei Technologies Co. to Hikvision spurred appetite for home-grown components.
Nineteen of the world’s 20 fastest-growing chip industry firms over the past four quarters, on average, hail from the world’s No. 2 economy, according to data compiled by Bloomberg. That compared with just 8 at the same point last year. Those China-based suppliers of design software, processors and gear vital to chipmaking are expanding revenue at several times the likes of global leaders Taiwan Semiconductor Manufacturing Co. or ASML Holding NV.
That supercharged growth underscores how tensions between Washington and Beijing are transforming the global $550 billion semiconductor industry — a sector that plays an outsized role in everything from defense to the advent of future technologies like AI and autonomous cars. In 2020, the U.S. began restricting sales of American technology to companies like Semiconductor Manufacturing International Corp. and Hangzhou Hikvision Digital Technology Co., successfully containing their growth — but also fueling a boom in Chinese chip-making and supply.
While shares in the likes of Cambricon Technologies Corp. have more than doubled from lows this year, analysts say there could still be room to grow. Beijing is expected to orchestrate billions of dollars of investment in the sector under ambitious programs such as its “Little Giants” blueprint to endorse and bankroll national tech champions, and encourage “buy China” tactics to sidestep U.S. sanctions. The rise of indigenous names has caught the attention of some of the pickiest clients: Apple was said to consider Yangtze Memory Technologies Co. as its latest supplier of iPhone flash memory.
“The biggest underlying trend is China’s quest for self-sufficiency in the supply chain, catalyzed by Covid-related lockdowns,” Morningstar analyst Phelix Lee wrote in an email responding to inquiries from Bloomberg News. “Amid lockdowns, Chinese customers who mostly use imported semiconductors need to source homegrown alternatives to ensure smooth operations.”