China's Micron inquiry boosts domestic chip makers as investors bet on state support

Chinese chip stocks rose after China opened an investigation into US chipmaker Micron, as investors believed the country's effort to increase its semiconductor manufacturers' level of self-reliance would be successful.

According to information from Bloomberg, an index monitoring shares of companies involved in the semiconductor industry gained as high as 3.9% on Monday in Shanghai and Shenzhen. The increase contributed to the CSI 300 Index's fourth straight day of gains of 0.9%, the longest winning streak since January.

Shenzhen Kaifa Technology, a manufacturer of memory chips, increased by 10% to 100.50 yuan; Dosilicon, a designer of memory chips, increased by 14.7% to 39.78 yuan; and Ingenic Semiconductors, a producer of central processing units, increased by 13% to 100.50 yuan.

Semiconductor Manufacturing International Company (SMIC), the largest chip manufacturer in China, increased by 2.6% to HK$19.08 in Hong Kong, while Hua Hong Semiconductors increased by 0.3% to HK$34.85.

According to Essence Securities analyst Ma Liang in a research note published on Sunday, "the investigation into Micron opens up new opportunities for the domestic memory-chip industry." The investigation will spur China to accelerate the development of domestic alternatives, helping both chip producers and chip-equipment makers, together with Japan's export ban, Ma said.

On Friday, China responded to American semiconductor companies for the first time by starting a cybersecurity investigation into Micron to "safeguard key information infrastructure supply chain security." The US memory-chip company claimed to be "cooperating fully" with the regulator, but experts warned that if its devices were found to have broken cyber securities, they could face "restrictive measures."

According to Woz Ahmed, managing director at consultancy Chilli Ventures, "They [Chinese regulator] did it to a US company in a semiconductor product segment where China has a relatively advanced domestic player, Yangtze Memory Technologies," He added Beijing has made it plain that it will respond without taking too many chances.

The market has begun to wager on further assistance from Beijing as a result of China increasing investment and implementing policies to support the semiconductor industry, where it has been surrounded on all sides by the US and its allies.

According to Bloomberg data, the CNI Chips Index has increased by 18.5% so far this year, outpacing the CSI 300's growth of 5.5%.

By fLEXI tEAM