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While the U.S. recently eased export restrictions on advanced semiconductors by firms like Nvidia Corp. and Advanced Micro Devices Inc., a leading Chinese chipmaker has declared that its domestic market is already substituting foreign alternatives.
What Happened: This dual-sided development in the global tech war creates a complex picture for the industry. On one hand, American firms like Nvidia and AMD are regaining access to a crucial market. On the other hand, China's push for self-sufficiency is yielding results, potentially diminishing the long-term impact of the policy reversal.
The U.S. government’s decision to permit the sale of Nvidia’s H20 and AMD’s MI308 chips to China marks a significant change after a ban that cost American companies billions in revenue.
However, according to a Nikkei Asia report, Semiconductor Manufacturing International Corp. (SMIC) co-CEO Zhao Haijun stated that a growing number of Chinese clients can “perfectly” replace foreign rivals with domestically-produced chips.
SMIC’s commentary is backed by tangible growth figures. Zhao noted that some of the company's clients in the power-related semiconductor sector have increased their monthly wafer orders tenfold within just two years.
This surge in demand has led to SMIC’s production capacity being constrained through at least October, with domestic clients now accounting for over 50% of its 8-inch wafer orders.
This rapid domestic substitution strategy also extends to the automotive sector, where China has a stated goal of using 100% homemade chips.
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Why It Matters: Despite the ongoing trade tensions and the new U.S. tariffs, SMIC expects the financial impact to be minimal, projecting it to be less than 1.3% of its total revenue. This confidence is rooted in the company’s strong domestic demand, which appears to be insulating it from external pressures.
Additionally, China’s top internet watchdog, the Cyberspace Administration of China (CAC) has recently raised concerns over potential security vulnerabilities in the H20 chip, a development that could complicate the chipmaker's expansion plans in the world's second-largest economy.
The CAC summoned Nvidia officials in July for a closed-door meeting, demanding clarity on whether the H20 chip includes backdoor security risks that could threaten national data privacy.
Meanwhile, domestically, President Donald Trump stated that his administration would slap a 100% tariff on all foreign-made semiconductors, unless companies pledge to construct fabs in the U.S.
Price Action: Here’s how some semiconductor stocks and exchange-traded funds have performed.
| Chips Stocks | YTD Performance | One-Year Performance |
| Advanced Micro Devices Inc. (NASDAQ:AMD) | 42.92% | 26.47% |
| Nvidia Corp. (NASDAQ:NVDA) | 30.70% | 72.21% |
| Broadcom Inc. (NASDAQ:AVGO) | 30.94% | 108.43% |
| Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) | 20.36% | 47.44% |
| Texas Instruments Inc. (NASDAQ:TXN) | -0.56% | -3.82% |
| Semiconductor ETFs | YTD Performance | One-Year Performance |
| iShares Semiconductor ETF (NASDAQ:SOXX) | 11.08% | 13.05% |
| VanEck Semiconductor ETF (NASDAQ:SMH) | 18.93% | 29.44% |
| Direxion Daily Semiconductor Bull 3X Shares (NYSE:SOXL) | -9.65% | -20.53% |
| Direxion Daily Semiconductor Bear 3X Shares (BMV:SOXS) | -68.53% | -74.67% |
| GraniteShares 2x Long NVDA Daily ETF (NASDAQ:NVDL) | 28.83% | 93.94% |
Price Action: The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, were higher in premarket on Friday. The SPY was up 0.38% at $634.67, while the QQQ advanced 0.37% to $571.37, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock
Posted In: AMD AVGO BMV:SOXS NVDA NVDL QQQ SMH SOXL SOXS SOXX SPY TSM TXN
