HomeNewsTSMC's Premium Over SMIC Highlights Challenges for China's Chip Fund

TSMC’s Premium Over SMIC Highlights Challenges for China’s Chip Fund


TSMCThe share price disparity between Taiwan Semiconductor Manufacturing Co. (TSMC) and China’s largest chipmaker is practically at its widest in nearly two decades, illustrating the difficulty Beijing confronts in developing its local chip industry.

TSMC has gained 48 percent this year in Taipei, while Semiconductor Manufacturing International Corp. (SMIC) lost 7.5 percent, resulting in the worst yearly performance disparity since 2005.

The divide has emerged despite the fact that China’s largest semiconductor investment vehicle, Big Vehicle III, wants to boost the domestic sector in the face of US efforts to restrain expansion.

Increasing SMIC’s technology “is not something that can be achieved overnight, even with abundant funding,” said Shen Meng, a director at Beijing-based investment bank Chanson & Co.

China is capable of producing 7-nanometer chips, which are two generations behind the most sophisticated semiconductors in commercial production, but it is aiming for 5-nanometer processors in the face of US restrictions.

TSMC produces more advanced 3-nanometer chips using extreme ultraviolet (EUV) lithography equipment, which cannot be exported to China due to export constraints.

Bloomberg Intelligence analyst Charles Shum (沈明) stated, “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.” “The technology gap concerns not only the attainment of a particular level but also the efficiency with which it can be attained.”

Big Fund III is the official name of the third vehicle of the National Integrated Circuit Industry Investment Fund, which the Chinese government has revealed few specifics about. Despite this, investors are confident that it would help resolve certain sector concerns.

Shanghai Chengzhou Investment Management Co. director Xiang Xiaotian stated, “The new fund is expected to focus on advanced technology, including wafer manufacturing, packaging, process control, and equipment materials.”

According to Li Xun, an investment adviser at Guotai Junan Securities Co., the fund may potentially pursue investments in AI chips.

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