China chipmaking stocks surge on EUV lithography tech progress

Investing.com– Chinese chipmaking stocks, especially those in the foundry sector, rose sharply on Tuesday as media reports showed progress in domestic lithography technology, which could allow local players to sidestep U.S. chip sanctions. 

Semiconductor Manufacturing International Corp (HK:)- the country’s biggest chipmaker by capacity- jumped 7.4% in Hong Kong trade, while Sunny Optical (OTC:) Technology Group Co Ltd (HK:) rose 5.4%. Hua Hong Semiconductor Ltd (HK:) added 3.4%. 

Shanghai-listed Will Semiconductor Co Ltd Shanghai (SS:) and Shenzhen-listed NAURA Technology Group Co Ltd (SZ:) rose between 1.5% and 2%. 

Gains in Chinese chip stocks came as local media reported a breakthrough in Chinese chipmaking technology, specifically in extreme ultraviolet lithography- which is a key technology in manufacturing chips smaller than 7 nanometers.

The Harbin Institute of Technology scientists claimed to have developed a compact and stable source of EUV light that could then be used to manufacture advanced, sub-7nm chips.

Currently, Dutch company ASML Holding NV (AS:) is the only major manufacturer of EUV lithography equipment, and under current U.S. sanctions, is prohibited from selling the technology to Chinese entities. 

But China developing its own EUV technology allows local chipmakers to bypass U.S. sanctions and develop advanced AI chips without depending on U.S. technology. 

The outgoing Biden administration recently announced its most aggressive round of sanctions against China’s chip industry, essentially blocking local developers from advancements in computing technology.

This was done with the intent of slowing China’s progress in developing artificial intelligence- a sector that has come squarely into focus in recent years.

President Donald Trump- who took office on Monday- is expected to maintain a hawkish stance against China. 

But Chinese chipmaking stocks, especially those in the foundry sector, rallied on the prospect of increased local demand, as Beijing also began incentivizing businesses to source chips locally.