The low-profile yet surprising release of a new phone by Huawei Technologies Co. last week has sparked a hunt for potential beneficiaries, on the bet it represents a jump forward in China’s domestic chipmaking.
(Bloomberg) — The low-profile yet surprising release of a new phone by Huawei Technologies Co. last week has sparked a hunt for potential beneficiaries, on the bet it represents a jump forward in China’s domestic chipmaking.
Traders and investors have piled into China’s biggest chipmaker, Semiconductor Manufacturing International Corp., adding more than $5 billion to its market value since the start of last week and accelerating its surge on Monday after a teardown for Bloomberg News revealed Huawei is using SMIC’s chips.
Read more: Huawei Teardown Shows Chip Breakthrough in Blow to US Sanctions
Investors also chased companies that have business links with Shenzhen-based Huawei. Dingli Communications Corp., which tests network communications with Huawei products, spiked 38% in two days, even though that’s only a marginal part of its overall business. Dalian Zhiyun Automation Co., an automation equipment supplier to Huawei, has soared around 75% in the past week even after the company said it’s unaware of any catalyst to trigger the stock surge.
The stock frenzy is riding optimism about China’s chip industry, which the Mate 60 Pro has quickly become a symbol for. Its 7nm SMIC processor hints at early progress toward developing a domestic chipmaking ecosystem, according to TechInsights, the semiconductor specialists who conducted the teardown for Bloomberg. That could spur additional demand across the silicon supply chain.
Still, without the detailed specification of Huawei’s chip, as well as better information on the viability of producing the part in large volume and at reasonable cost, chasing the rally looks increasingly risky.
SMIC and Dalian Zhiyun’s shares are trading in the overbought zone in both Hong Kong and Shanghai following the recent rally, based on the 14-day relative strength, data compiled by Bloomberg show.
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