The share price gap between Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and China’s biggest chipmaker is almost at its widest in nearly two decades, highlighting the difficulty Beijing faces in building up its domestic chip industry.
Bolstered partly by state-of-the-art chipmaking capabilities, TSMC has soared 48 percent this year in Taipei while Semiconductor Manufacturing International Corp (SMIC, 中芯國際) lost 7.5 percent, leaving the gap between the two stocks’ annual performance poised to be the biggest since 2005.
The chasm has occurred even as China’s largest semiconductor investment fund, known as Big Fund III, aims to develop the local sector amid US efforts to limit growth.
Photo: Ann Wang, Reuters
Boosting SMIC’s technology “is not something that can be achieved overnight, even with abundant funding,” said Shen Meng (沈萌), a director at Beijing-based investment bank Chanson & Co (香頌資本).
China is capable of making 7-nanometer chips, two generations behind the most sophisticated semiconductors in commercial production, but it is seeking to progress to 5-nanometer chips amid US curbs.
TSMC uses extreme ultraviolet (EUV) lithography equipment to produce more advanced 3-nanometer chips, but such tools cannot be sold to China due to export controls.
“Even if SMIC can produce chips using 5-nanometer technology, the cost would be at least 10 times higher than those produced at TSMC without EUV machines,” Bloomberg Intelligence analyst Charles Shum (沈明) said. “The technology gap isn’t just about reaching a certain level, it’s also about how effectively you can achieve it. ”
Although the Chinese government has unveiled few details on the third vehicle of the National Integrated Circuit Industry Investment Fund, Big Fund III’s formal name, investors are betting it would help solve some sector issues.
“The new fund is expected to focus on advanced technology, including wafer manufacturing, packaging, process control and equipment materials,” said Xiang Xiaotian, a director at Shanghai Chengzhou Investment Management Co (上海誠洲投資管理).
The fund might also target investments in AI chips, said Li Xun (李尋), an investment adviser at Guotai Junan Securities Co (國泰君安證券).
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