EXCLUSIVE: KraneShares CIO Talks Intel And AMD, As China Seeks Semiconductor Self-Sufficiency

China has set a deadline for its leading telecom operators to rid their networks of foreign semiconductors by 2027.

In an exclusive interview with Benzinga, Brendan Ahern, Chief Investment Officer at KraneShares, shared his views on the implications this will have on semiconductor companies and investors.

This directive targets chips from American giants Intel Corp INTC and Advanced Micro Devices Inc AMD. These firms have long dominated the Chinese telecom infrastructure landscape.

Now, they face the prospect of losing a significant portion of their revenues. China accounts for 27% and 15% of their total revenues, respectively.

And yet, Ahern expects that foreign chip suppliers like Intel and AMD will experience limited commercial impact.

“The directives only apply to government procurement, not the broader commercial market in China,” he says. The directives appear to be “more of a political and symbolic move.”

This situation mirrors a U.S. decision from four years ago. Recall how telecoms regulator FCC imposed a ban on equipment from Chinese firms Huawei and ZTE, citing national security concerns.

“The directives do signal China’s broader push towards semiconductor self-sufficiency, both in chip design and manufacturing,” noted Ahern.

Huawei, in particular, is spearheading efforts in this regard. It has plans to establish a research and development facility outside Shanghai focused on developing homegrown chipmaking technologies.

Additionally, Semiconductor Manufacturing International Co. is also making noteworthy advances in high-end silicon technologies.

Also Read: Apple’s Falling iPhone Sales Have Another Challenge To Deal With As Huawei Launches New Phones

Opportunities For Investors

Ahern recommends that investors consider KraneShares CICC China 5G and Semiconductor Index ETF KFVG, which could capitalize on this trend.

The ETF’s holdings (stocks are not available to trade in the U.S.) include:

• Foxconn Industrial Internet Co Ltd Class A (9.77%)
• Xiaomi Corp Class B (8.02%)
• Luxshare Precision Industry Co Ltd Class A (5.23%)

Furthermore, potential stock picks may include leading Chinese chip design firms and chip manufacturing equipment companies benefiting from the government’s push for domestic chip production.

Three stocks to consider for U.S.-based investors:

• Hua Hong Semiconductor HHUSF
• Intchains Group ICG
• ACM Research ACMR

Hua Hong positions itself for expansion with a notable listing on the Shanghai Exchange. Intchains’ versatile operations and robust finances make it an attractive stock. ACM’s upgraded revenue projections and favorable analyst assessments signal a promising trajectory for the stock.

As China accelerates its quest for semiconductor sovereignty, investors should remain attuned to the evolving landscape, where geopolitical tensions intersect with technological ambitions.

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