To The Moon

According to a Reuters report, executives from chip giants such as Intel, Qualcomm, and Nvidia $NVIDIA Corp(NVDA)$ met with the Biden administration on their policies toward China on the 17th. The insiders revealed that these executives opposed tightening export controls on chips and semiconductor manufacturing equipment to China. It is reported that Washington plans to announce new rules within a few weeks. Prior to this, there were media reports that the Netherlands and the United States were pressuring ASML $ASML Holding NV(ASML)$ to prohibit the sale of DUV lithography machines to China without Washington's approval, and even to provide maintenance, repair services and supply spare parts for restricted equipment are subject to government approval. The chip war between China and the United States is in full swing, and all kinds of news are also confusing. Looking forward to the future, will the chip war continue to increase or will it ease? What the impact will it have on semiconductor companies in China and the United States? First of all, I personally believe that the China-U.S. Chip War will continue to increase, and advanced equipment and products will be strictly controlled. The reason why the United States chose semiconductors to suppress China is that the so-called national security is just a cover, and the real reason behind it is that this industry is the main artery of the economy and is related to the rise and fall of the country. For example, Apple $Apple(AAPL)$ , the company with the largest market value in the world, its iPhone, Mac, and iPad are essentially semiconductor products. In 2019, Huawei's mobile phone sales reached 240 million, surpassing Apple's 198 million. If the U.S. government does not kill Huawei, how can Apple achieve the current myth of a market value of US$3 trillion? Another example is Tik Tok in China. Although its business is Internet applications and has little correlation with the semiconductor industry, China, as a follower of the mobile Internet, has emerged with world-class applications that can challenge Google and Meta. You know, there are no large Internet companies exist so far in Europe, Japan and South Korea nowadays. Today, ChatGPT has set off a wave of AI revolution. This change is no less than the industrial revolution. In the future world, whoever can lead in this field will become the economic hegemon. Just like the mobile Internet, China is second only to the United States in terms of AI investment. If Nvidia's GPU is not used to block China's neck, who dare to bet that there will be no Tik Tok in the AI world? Only by firmly grasping the changes of The Times can we ensure a steady increase in per capita GDP. Since the mobile Internet wave in 2010, the per capita GDP of the United Kingdom, Japan, Germany, and France has stagnated, while the United States is the only major developed countries in the world has improved: Therefore, there is no room to ease in the China-U.S. Chip War. Even if the Biden administration changes, China will unswervingly recommend the localization of semiconductors. Once the world is divided, it will be difficult to heal. In this case, how will the US chip stocks be affected? Take ASML as an example. The company is the bridgehead of the China-U.S. Chip War, and the main restrictions are also concentrated in the field of lithography machines. Personally, I think that the China-U.S. Chip War has little impact on ASML for the following reasons. In the performance of ASML, the most advanced EU lithography machine contributed nearly half of the revenue, and the EUV lithography machine has been banned from the United States to China since its birth: Although some advanced DUV lithography machines have also been banned from sale, the impact on ASML is still small, because lithography machines are upstream equipment for chips. Even if they cannot be sold to Chinese manufacturers, China still needs the products manufactured by DUV. Therefore, the demand for DUV in China is actually made up by wafer factories such as TSMC, Samsung, and Intel, which does not affect ASML's performance. This is also the fact that the United States has repeatedly imposed restrictions on lithography machines in the past year, but it has never affected ASML's stock price. Similarly, for Nvidia’s most advanced GPU, although China cannot buy it, the demand for AI has not disappeared. As long as ChatGPT can be called, the demand for Chinese GPU will also be made up by American manufacturers. Considering that AI is on the eve of the outbreak, only The demand in the United States has huge room for growth, and the Sino-US chip war will eventually have little impact on Nvidia’s performance. It can be seen from ASML and Nvidia that as long as the semiconductor technology is in a leading position, the chip war will have little impact on the stock price, but if the technical moat is not high enough to be replaced by Chinese semiconductor manufacturers, it will have an adverse impact on performance. For example, Applied Materials, the world's largest semiconductor equipment manufacturer, is expected to lose as much as US$2.5 billion in the chip war. Another example is that Micron Technology has been sanctioned by China. According to the quarterly report, Micron’s revenue from China accounts for about 25% of its total revenue, and management expects half of it to be affected by the ban. So, the chip war between China and the United States has little impact on companies with an absolute monopoly in technology. The weaker the technology, the easier it is to be replaced by China. When investing, investors should not expect the chip war to ease!