SMIC Will Catch Up With TSMC’s ‘Trillion Dollar’ Market Cap, Says Hedge Fund Boss

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China's largest chip manufacturer, the Semiconductor Manufacturing International Corporation (SMIC) can match TSMC in market capitaliztion believes Wong Kok Hoi of APS Asset Management. TSMC is the world's largest and leading chip manufacturer, whose advanced technologies are used by all of the world's largest technology companies to manufacture their products. On the other hand, SMIC has struggled to master the older 7-nanometer chip manufacturing process since sanctions have cut its access to advanced EUV chip manufacturing machines from ASML.

However, the analyst believes that China's talent pool and sizable resources can provide SMIC with key advantages that allow it to operate at a large scale without relying on Western customers.

Chinese Firms Will Shun US Chip Companies Once Indigenous EUV Equipment Is Developed, Says Hedge Fund Boss

TSMC is Taiwan's most valuable firm courtesy of its partnerships with the leading technology companies in the world. The firm's depository shares are traded on the NYSE, and their latest market capitalization is $841 billion. Courtesy of TSMC, firms like Apple, NVIDIA and AMD can access the latest chip manufacturing technologies for their products, and the stock is up 103% over the past twelve months courtesy of investor expectations of its ability to cater to the current AI boom.

On the other hand, SMIC is China's largest chip manufacturer. Following US restrictions on TSMC that prevent it from selling the latest chips to Huawei, the firm's importance in the Chinese chip ecosystem has grown as it is the only domestic firm capable of meeting Huawei's demands at scale.

However, sanctions have also prevented SMIC from developing chips beyond the 7-nanometer process technology which has prevented Huawei from competing with firms such as Apple in the smartphone industry.

In a talk given to Bloomberg's China Show earlier this week, Singapore-based hedge fund APS Asset Management's founder and chief investment officer Wong Kok Hoi shared that TSMC is "the best foundry in the world, without doubt." TSMC is valued at "more than a trillion dollars," SMIC's market value of roughly $50 billion leaves a "gap between SMIC and TSMC," Wong added, but he mentioned that "over time, I believe, SMIC will catch up."

To bolster his argument, the hedge fund manager shared several factors. He started out by outlining that "in technology, you need three or four things to be successful eventually." One of these "money, because it requires huge capex," he outlined, with SMIC having "the capital" along with "the support of the Chinese government."

According to Wong, China produces "more than five million graduates" every year, which provides SMIC with sufficient human resources to grow. Along with financial and human resources, China's "huge domestic market" means that SMIC "does not need to worry whether or not it can sell to US companies by just selling alone, in China alone, it can make a very good living."

These factors have left his firm "convinced that the gap between SMIC and TSMC will narrow." The gap has already narrowed, believes Wong. He also commented on SMIC's inability to access EUV equipment, sharing that "as soon as one Chinese company will successfully develop the EUV lithography equipment, then the chip war will end."

Wong predicts that "within three years from that day, half of US companies, US semi companies will get in big trouble. Because no Chinese company will want to buy, whether equipment or chips, from US companies. They'll buy mostly from their own companies."

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