China launches chip stock index to support investment in the sector

China formally launched the STAR Chip Index to track the performances of leading firms in such fields as semiconductor materials and equipment, chip design, and chip packaging and testing, aiming to attract more capital investment into the increasingly crucial industry. Experts said that the index will further diversify investors' options and actual investment, guiding more capital into the country's up-and-coming integrated circuit industry, which represents an important direction of development set in multiple national strategic plans. According to the Shanghai Stock Exchange (SSE), up to 50 listed companies with large market capitalizations were selected as the constituents of the index, including Semiconductor Manufacturing International Corp (SMIC), Montage Technology Co and National Silicon Industry Group Co.

“As another major sub-index of the STAR Market, the rollout of the STAR Chip Index underlines the growing importance of the chip industry for China, especially amid the U.S.' accelerated tech decoupling push,” an anonymous capital market insider told the Global Times. The move will offer investors better knowledge of the overall performance of leading Chinese chip companies so that chipmakers can raise funds at a reasonable price to step up research and development (R&D), and expand their businesses, the insider said. “There is no doubt that more capital will flow into the strategically important sector under market forces.” While some Western countries have imposed technological blockades and sought to restrict chip product exports to China, many firms are striving for breakthroughs in various areas. Shanghai-listed silicon carbide substrates producer SICC Co independently developed semi-insulating silicon carbide substrate materials, achieving self-reliance and control of the core material, and effectively ensuring domestic supply to maintain the stable development of the industry chain in China.

Chip-related companies on the STAR Market recorded outstanding growth in 2021, posting year-on-year increases of up to 181% in profit. Their R&D investment expanded 15.4% to CNY17.66 billion, providing strong support for the high-quality development of the industry chain. The U.S. Department of Commerce is considering a ban on U.S. firms selling advanced chipmaking equipment to Chinese companies. China was the largest market for semiconductor equipment for the second time in 2021, with sales expanding 58% year-on-year to USD29.6 billion, the fourth consecutive year of growth, according to industry association SEMI, the Global Times reports.