Chinese Chip Manufacturers See Gains in Hong Kong on Optimism about Huawei's Future

Huawei's Breakthrough Technology Spurs Optimism in Chinese Semiconductor Stocks

Chinese semiconductor stocks rose in Hong Kong on Monday, fueled by optimism over a potential breakthrough in technology by Huawei Technologies Co. The company's announcement that it will start making 1.4-nanometer chips by 2031 with its own "LogicFolding" technology has sparked excitement among investors.

The new process, which could help China's chip manufacturers narrow the technology gap with Taiwan Semiconductor Manufacturing Co., has been hailed as a significant development. Mainland-listed peers, including Semiconductor Manufacturing International Corp. and Hua Hong Semiconductor Ltd., advanced on Monday, jumping more than 16% each as the market reopened after a holiday. GigaDevice Semiconductor Inc. rose as much as 12%, while Montage Technology Co. rose 6%.

The Huawei technology, once fully developed, promises to boost the performance of China's future AI chips. This would help Chinese tech firms maintain competitiveness, despite export restrictions on advanced Nvidia Corp.'s most advanced processors to the Asian nation. The breakthrough could also help development of Chinese artificial intelligence models, which has been held back by a US ban on shipments of Nvidia Corp.'s most advanced processors.

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The Huawei method, proposed by the company's chip team led by He Tingbo, uses a new time-scaling approach to boost data transmission speed in transistors. This approach rivals the previous focus on shrinking transistors to fit more onto the chip under the Moore's Law guidelines used by the industry for decades. If it works, the Huawei method could potentially eliminate the need for the most advanced chipmaking equipment made by ASML Holding NV, enabling products to come to market more quickly at much lower cost.

While the Huawei news excited investors, LogicFolding is as yet unproven. A key test will be the success of the Kirin mobile chips that Huawei plans to launch this fall, the first product to be made using the process. William Keating of Ingenuity noted that a keynote abstract is not a product, and a key test will be the success of the Kirin mobile chips.

Huawei has been at the vanguard of Beijing's self-reliance drive following a years-long US-led, multinational campaign to tighten exports of advanced technology that has somewhat curbed China's AI progress. If the breakthrough is confirmed, it would "significantly close the gap" with leading chip foundries like TSMC and Intel Corp., said Felix Wang, tech sector head at Hedgeye Risk Management. "Huawei's achievement will further boost the self-sufficiency narrative in China."

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